Italy changes law on right to claim citizenship through great-grandparents

Italy has enacted a law restricting citizenship by descent to those with Italian parents or grandparents, effectively ending eligibility for those with only Italian great-grandparents. This change, introduced by Prime Minister Meloni's government, impacts an estimated 80 million people worldwide of Italian descent who had hoped to claim citizenship through ancestry, potentially deterring investment and economic contributions from those seeking to connect with their heritage. The move is compounded by uncertainty surrounding an upcoming referendum on residency-based citizenship rules, which could either halve or increase the required residency period for non-EU citizens.

Analysis

The Italian government has enacted a new law, effective this week, which restricts eligibility for citizenship by descent (jus sanguinis) to individuals with Italian parents or grandparents, thereby rescinding the pathway for those claiming through great-grandparents. This legislative measure, introduced by Prime Minister Giorgia Meloni’s administration, directly affects a significant portion of the estimated 80 million people of Italian descent worldwide, according to Italy's Interior Ministry. Many individuals, such as Gina Pace Trucil who reportedly incurred substantial expenses, had already commenced the application process and now face disqualification. Alternative routes to citizenship, primarily through residency, have simultaneously become more challenging due to stricter visa regulations for non-EU citizens, mandating 10 years of legal residency, verifiable minimum annual income (e.g., €8,263.31 for individuals without children), and language proficiency. Further compounding this uncertainty is an upcoming referendum on June 8-9 concerning residency-based citizenship, which could result in either a reduction of the residency requirement to five years or a potential increase to twelve years. Industry experts, including Samantha Wilson of Smart Move Italy, express concern that these changes will deter inward investment, new business formation, and other economic contributions from the diaspora, potentially worsening Italy's demographic issues related to a declining population. While legal challenges to the new law in Italy’s constitutional court are anticipated, this process is expected to be protracted and costly, reflecting a pessimistic outlook on immediate remedies and an overall negative sentiment regarding this policy shift.

Key Decisions for Investors

• Investors with holdings in Italian sectors reliant on domestic demand and inward investment, such as real estate and small to medium-sized enterprises, should monitor for potential dampening effects stemming from reduced immigration and diaspora capital inflows.
• The heightened policy uncertainty surrounding citizenship and immigration laws in Italy suggests a cautious stance may be warranted for long-term investments that are sensitive to demographic trends and regulatory stability within the country.
• Key developments to track include the outcome of the upcoming referendum on residency-based citizenship and the progress of any constitutional challenges to the new law, as these will provide insights into future policy direction and its potential economic consequences for Italy.