LDN - Business

Italy approves tight budget partly funded by a levy on banks and insurers

[October 16, 2024] By GIADA ZAMPANO

ROME (AP) — Italy’s far-right government has approved a budget for next year of about 30 billion euros ($33 billion), which officials say will be partly funded by a levy on Italian banks and insurers.

Prime Minister Giorgia Meloni said late Tuesday that the government expected to raise some 3.5 billion euros from banks and insurance companies to ensure better public services, especially the country's struggling health service, and help the most vulnerable citizens.

“As we promised, there will be no new taxes for citizens,” Meloni wrote in a post on X.

The 2025 budget law was agreed by ministers at a cabinet meeting late Tuesday, just in time to meet a deadline to submit the plan to the European Union. The measures still need to be approved by the Italian parliament, with a final vote expected by the end of the year.

Economy and Finance minister Giancarlo Giorgetti had been under intense pressure for weeks to reconcile the need to speed up Italy’s deficit reduction — closely watched by the EU — with the government’s expensive electoral promises.

“Someone would call it an extra profit (tax), I call it a sacrifice,” Giorgetti said at a press conference on Wednesday, commenting on the new levy on banks and insurers.

Government officials didn’t release details on the new financial levy. But some Italian media reported it would focus on temporarily removing deductions for lenders’ so-called deferred tax assets and increasing taxes on bankers’ stock options.

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Economy minister Giancarlo Giorgetti holds a press conference on the approved Budget Bill in Rome, Wednesday, Oct. 16, 2024. (Roberto Monaldo/LaPresse via AP)

The minister revisited a prior plan by the right-wing government, which has repeatedly criticized banks for gaining excessively from higher interest rates.

A first attempt to tap lenders with a 40% windfall tax failed last year, after the move sparked a major selloff in Italian banking stocks, forcing the government to withdraw the plan.

Vice-Premier Antonio Tajani said in a post on X that the new contribution from banks will “not frighten the markets.”

Giorgetti said on Wednesday that additional resources will also come from a “spending review” imposed on Italian ministries, which have been asked to tighten their belts and propose spending cuts.

The 2025 budget also includes permanent cuts to income tax and social contributions for middle- and low-income earners, one of Meloni's main electoral pledges.

To fund the new package of measures, Italy will widen next year’s deficit to 3.3% of gross domestic product from an estimated 2.9%.

Rome is under pressure to keep its accounts under control, after having being placed under special monitoring by Brussels for running deficits far in excess of the EU’s 3% limit and for not reducing its mammoth debt, now close to 3 trillion euros.

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