Italy slaps windfall tax on banks

Italy's Deputy Prime Minister Matteo Salvini has hit out at the European Central Bank, or ECB, after announcing a surprise 40 percent windfall tax on profits made by Italy's banking sector.

Just days after Prime Minister Giorgia Meloni's confident predictions about the country's economic health were hit by a worse than expected GDP contraction of 0.3 percent in the second quarter, the surprise move was announced.

The ECB, as the setter of interest rates, has been blamed for the financial pinch being felt by Italian bank customers, who are dealing with inflation at its highest in decades and a faltering post-pandemic economic recovery.

In June, the ECB raised interest rates for the ninth time in a row, up 0.25 percentage points to 3.75 percent, their highest level in 22 years.

"The ECB's rate hike has raised the cost of money for families and businesses," said Salvini. "There wasn't, in turn, a diligent, rapid and important increase for consumers," he said, adding that money raised would go toward tax cuts and "help for first-time mortgage holders signed up in different times".

No specific figure has been mentioned for how much could be raised, but the Politico website reported that it was likely to be at least 2 billion euros ($2.196 billion).

"Let's not get into the merit of the figures," added Salvini. "You only need to look at the first quarter profits of the banks to see that we're not talking about a handful of millions, but potentially many billions."

He later told RAI public radio "some bankers are regretting (it) but we are talking about an industry that is making billions and billions in profits without lifting a finger… redistributing a small part of these profits is economically and socially rightful".

The decision, which followed similar moves by governments in Spain and Hungary, took an instant toll on the share price of Italy's major lenders, with Intesa Sanpaolo and UniCredit falling by 8.2 percent and 7.2 percent respectively, although they have recovered slightly since.

"These government interventions in Europe do not help provide the necessary stability to lower the risk premium attached to the eurozone," Gilles Guibout, head of equities strategies at Axa Investment Managers in Paris, told broadcaster Al Jazeera.

There has also been criticism from political observers of the way Monday night's announcement was handled, with it being made by Salvini, rather than Finance Minister Giancarlo Giorgetti, who was notable by his absence, although senior political sources have played down talk of dispute over the issue.

"You don't do these things — you don't put a tax on the banks without telling them and without having the finance minister go on TV to explain it," Francesco Giavazzi, who served as economic adviser to former prime minister Mario Draghi, told the Financial Times newspaper.