Italy continues to prepare a sovereign wealth fund to support critical parts of its economy amid broader efforts by several European countries to bring global supply chains closer to home, CNBC and news.ro reported.

Italian Enterprise Minister Adolfo Urso announced last week the creation of a public-private fund that aims to strengthen “strategic national supply chains” in raw materials and energy.

A diplomatic source in Italy confirmed to CNBC that only high-potential or systemically relevant companies will receive the funding.

It is expected that this plan will be adopted by the parliament before the end of the year.

The announcement comes after Ireland, another EU country, said earlier this month that it plans to set up a national welfare fund next year.

This will be capitalized from exceptional tax revenue and cover long-term costs such as pensions and infrastructure.

France, the eurozone’s second-largest economy, also unveiled a plan for a critical metals investment fund earlier this month.

More broadly, the announcement follows trends in Europe where countries are looking to reduce their dependence on other countries such as China.

“This is a response to growing international competition for critical resources and supply chains,” Federico Santi, senior analyst at Eurasia Group, a consulting firm, told CNBC by email.

“First the pandemic and then the war in Ukraine and the resulting energy crisis have shown how vulnerable supply chains are to political and geopolitical changes. At the same time, large-scale investments in the “green” transition and related technologies have increased the need for critical resources,” he said.

In 2011, Italy created a capital management fund with investments in the energy, communications and aerospace sectors.

The latest plan to create a separate fund reinforces the view that Rome is trying to boost its industrial policy.

When Covid-19 broke out in early 2020, many European countries faced difficulties in buying masks and other protective equipment made in Asia.

Multinational corporations that had supply chains around the world had trouble maintaining their assembly lines, and as a result many products became more expensive.

Russia’s invasion of Ukraine undermined other sectors, including agricultural products and fertilizers.

Strategic autonomy

French President Emmanuel Macron has long been a proponent of strategic autonomy, the idea that European countries should reduce their dependence on countries outside the region.

The concept has gained more support during recent crises, and Macron went further in April when he pushed for less reliance on the United States, a longtime ally.

Macron warned that Europeans were in a crisis of their own making, citing US and Chinese views on Taiwan as an example.

His comments drew criticism in some European capitals, which are more conscious of supporting American security.

But Charles Michel, president of the European Council, which holds regular talks between EU leaders, said support for Macron’s views was growing.

Michel told Politico that while Macron spoke as the president of France, his views reflected a growing shift among EU leaders.

The topic will be at the center of attention when the 27 heads of state meet in June to discuss how to develop a new relationship with China that differs from that of the United States.

While the US administration is considering separating from Beijing, separating their economies, the Europeans are developing ways to reduce their dependence on China, but they do not want to aggressively cut ties.