Deal with Italy, finally making pact (6)
I believe the answer is:
treaty
'pact' is the definition.
(I know that pact can be written as treaty)
'deal with italy finally' is the wordplay.
'deal with' becomes 'treat' (synonyms).
'italy finally' becomes 'y' (I can't justify this - if you can you should give a lot more credence to this answer).
'treat'+'y'='TREATY'
'making' acts as a link.
(Other definitions for treaty that I've seen before include "alliance" , "Formal agreement between governments" , "Pact, accord between states" , "'Pact, accord (6)'" , "Ratified agreement between states" .)