Italy making banks help with budget

Italy will raise 3.5 billion euros ($3.81 billion) through new levies on domestic banks and insurance companies, in a bid to overcome a 9-billion-euro black hole in its budget, Prime Minister Giorgia Meloni announced this week.

She said in a post on the X social media platform that the new money will be used for crucial services.

"3.5 billion euros from banks and insurance companies will be earmarked for healthcare and the most vulnerable people, to ensure better services closer to everyone's needs," she wrote.

The levies will be aimed at the country's largest financial institutions, including Assicurazioni Generali, Banca Monte dei Paschi di Siena, Banco BPM, Intesa Sanpaolo, and UniCredit.

The new revenue will be generated by changes around the taxation of stock options for managers, and by tweaks to tax credits for institutions based on past losses, something known as deferred tax assets.

The new revenue stream follows recent plans for a 40 percent windfall tax on banks' unexpected profits failing to materialize in a meaningful way, thanks to a getout clause that meant institutions could avoid it.

As rumors of the new levies emerged, banks and insurers pushed back but the Reuters news agency reported Economy Minister Giancarlo Giorgetti saying last week that forcing them to make a contribution to the nation while it was struggling to balance its books "shouldn't be considered blasphemous".

Foreign Minister Antonio Tajani, who is also a deputy prime minister, wrote on X after the new levies were announced that they also should "not frighten the markets".

News of the new levies followed the government unveiling its budget for the coming three years, in which it said it will spend 30 billion euros during 2025 on initiatives including permanent cuts to income tax and social contributions aimed at middle-income workers and poorer families.

The government said the tax cuts will be funded through 9 billion euros of additional borrowing.

The European Union has a rule that calls for member nations to run an annual budget deficit of no more than 3 percent, and Italy angered Brussels last year by having one of 7.2 percent. The country is on course to post a deficit of 3.4 percent in 2024 and is targeting edging below 3 percent by 2026.

Italy's Treasury has said it also plans to move toward balancing its books by saving money through the rationalization of state spending.

Lawmakers adopted the draft budget late on Tuesday and will now send it to the EU for its approval.

The EU, which has criticized Italy previously for its "excessive "debts, has said it wants the country to detail how it will balance its books in the long term, and how it will lower its national debt, which stands at around 3 trillion euros.