With regards to you most generous offer to join your alliance, we have given much thought to this issue and as for now we would prefer to remain as we are for now pending later treaties.
The DERP organisation isn't an alliance in a military sense, its primary purpose is to increase cooperation between members in order to prevent wars in Europe, and to make the member states feel more important than they actually are. But if you feel that you wish to remain outside DERP, I respect that decision.
Actually, the Confederation was hoping to annex northern Italy to provide breathing room for its own population. If the WMU is amenable to this, the CEC has no interest in Sicily or the Italian peninsula south of Lazio and Abruzzo, which the Union would be more than welcome to add to its territory. The Confederation also thinks that the island of Malta would fit in well with the WMU's mission.
The WMU is not interested in territorial expansion for its own sake, we are interested in only one thing; nudist beaches. If you agree to make all the beaches in Northern Italy nudist beaches, we will withdraw our claims upon Tuscany and Emilia-Romagna and support your claim upon them.
Instead, I will claim Sicily, Malta and the Centre region of France, because I've got to do everything I can for those poor French men and women that are running out of wine. I must admit that the prospect of taking control of Sicily worries me as I fear the power of the Sicilian Mafia. What if they try to open illegal beaches where people are allowed to wear swimsuits? This possibility disturbs me greatly, but it is a risk I'm willing to take.
This should give me a population of exactly 100 million, so I guess I don't have to disown those engineers I sent to Scotland.
Aww, come on. I've been in San Marino a lot of times, and it's much more interesting as its own state than as yet another walled town in Italy. If Popes, Emperors and barbarians could leave it alone, so could you...
I cannot take the risk that someone else might claim these micro-states and use them against me. What if someone were to claim Monaco and place 1,000,000 tanks there, only 200km away from my capital?

Sure, 1,000,000 tanks probably wouldn't fit in Monaco, but they might if they were stacked on top of one another.
I'll leave Canada to the polar bears, is any of Australia left? Some waterfront? Or somewhere else warm and waterfront-y?
Greenland?