Italy tightens citizenship rules impacting millions claiming ancestral citizenship

Italy has tightened its citizenship rules, now requiring applicants to have at least one Italian parent or grandparent and demonstrate Italian language proficiency, impacting millions claiming ancestral citizenship. The new regulations, codified into law on May 20, 2025, aim to curb abuse and prioritize services for existing citizens, as the number of Italian citizens residing abroad has increased by 40% in the last decade. These changes come amid concerns about Italian passports being used for circumvention of immigration laws and ahead of a referendum on potentially easing naturalization rules for non-EU foreigners.

Analysis

Italy has significantly revised its ancestral citizenship regulations, with new rules codified into law on May 20, 2025, following an initial decree-law in March. The updated framework restricts eligibility primarily to children and grandchildren of Italian nationals, a notable tightening from previous rules that allowed individuals with Italian ancestors dating back to March 17, 1861, to qualify. Applicants under the revised *jus sanguinis* principle must now also demonstrate Italian language proficiency through a state exam and, for those born and residing abroad, maintain tangible connections with Italy by exercising citizenship rights at least once every twenty-five years. This policy shift, driven by Giorgia Meloni’s right-wing government, aims to curb perceived abuses, such as individuals obtaining citizenship for convenience or to circumvent travel restrictions, highlighted by reports of Italian passports being used for unauthorized entry into the United States. The significance of this change is underscored by the 40% increase in Italian citizens residing abroad between late 2014 and late 2024, reaching 6.4 million, and the high global ranking (3rd on Henley Passport Index) of the Italian passport. Consequently, Italy's consulates will now prioritize services for existing citizens over processing new applications, with a special centralized office at the Foreign Ministry handling citizenship determination, where over 60,000 legal proceedings are currently pending. These restrictive measures contrast with an upcoming referendum on June 8th-9th, which proposes halving the legal residency requirement for naturalization for non-EU foreigners from ten to five years. The provided signals indicate a negative sentiment surrounding these changes, likely reflecting the reduced accessibility for descendants, and a relatively low direct market impact score of 0.3.

Key Decisions for Investors

• Investors should assess potential adverse impacts on businesses specializing in Italian ancestral citizenship services, including legal and consultancy firms, due to the substantially narrowed eligibility criteria and increased requirements.
• Closely monitor the outcome of the June 8-9 referendum on easing naturalization rules for non-EU residents, as a 'yes' vote could create new demographic and economic dynamics, potentially benefiting sectors related to integration services, housing, and consumer goods in Italy, and partially counterbalancing the restrictive ancestral citizenship policy.
• Consider the broader, albeit potentially delayed, implications for sectors reliant on migration and international talent in Italy; while the signaled direct market impact is low, sustained restrictive policies could influence long-term labor supply and skills availability, alongside Italy's international image.