The Italian government of Giorgia Meloni called on the financial sector to complete an extremely tight 2025 budget project on Tuesday, October 15, in search of a delicate balance between electoral promises and the need to curb deficits. The Council of Ministers adopted a roadmap outlining the main lines of the budget that Rome must send to Brussels, containing measures for around 30 billion euros, part of which financed by banks and insurance companies.
“3.5 billion euros from banks and insurance companies will be allocated to health care and the most vulnerable people in order to ensure better services that meet everyone’s needs as closely as possible,” announced on X head of government. The Ministry of the Economy, for its part, indicated that the draft budget provides around 30 billion euros in support measures for employees and retirees, without specifying the nature of the contribution from the financial sector.
After strong tensions within the right-wing and far-right coalition over the taxation of banks, Matteo Salvini’s League (far-right) and Antonio Tajani’s Forza Italia (conservative) declared victory. Welcoming the government’s intervention, Deputy Prime Minister Matteo Salvini said that “taking into account the 40 billion profits” of the banks “for the year 2023 alone”, he expected “important contributions to support the country and , above all, the national health system”. “There will be no new taxes. The banks’ contribution is the result of an agreement, as we always wanted, and not of an imposition from above,” argued the other deputy head of government, Antonio Tajani. A staunch opponent of taxing banks’ superprofits, Antonio Tajani had previously estimated that such a measure would have been worthy of the “Soviet Union”.
The ruling coalition wanted to avoid at all costs a repeat of the 40% tax on banks’ “superprofits” announced by the Meloni government in August 2023, which had triggered a panic on the Milan Stock Exchange. Faced with the stock market debacle, the Prime Minister backtracked and significantly watered down her project which ultimately brought in nothing for the Italian Treasury.
“No new sacrifice”
To get around the pitfall of a tax on the financial sector that is frowned upon by the markets, the government plans to spread out over time the tax credits to which banks are entitled, in order to free up liquidity for the public Treasury.
The Minister of the Economy Giancarlo Giorgetti threw a wrench in the pond by announcing at the beginning of October that the budget “will require sacrifices from everyone”, both “citizens and small, medium and large businesses”. These statements triggered a mini-storm on the Milan Stock Exchange and led Giorgia Meloni to immediately correct the situation, promising that “no new sacrifices” would be asked of the Italians.
Tax cuts
Blacklisted by the European Union for its “excessive” deficits, just like France, Italy is under strong pressure to straighten out its accounts and reduce its enormous public debt which is close to 3,000 billion euros. The Meloni government has committed to reducing the public deficit by 2026 to 2.8% of gross domestic product (GDP), well below the 3% ceiling set by the European Stability Pact, a bet which is however far from ‘be won.
To curb spending, Rome is urging ministries to tighten their belts and intends to clean up certain tax reductions. The budget devotes around 15 billion euros to tax cuts and social security contributions for low-income earners, electoral promises dear to Giorgia Meloni. The head of the post-fascist Fratelli d’Italia party has thus renewed a reduction in social charges for annual salaries of up to 35,000 euros, already in force on a temporary basis. Another flagship measure, the government has perpetuated the merger of the first two tax brackets to provide annual income up to 28,000 euros with a reduced rate of 23% instead of 25%. To boost the birth rate, Giorgia Meloni, who boasts of being a “Christian mother”, has also promised a bonus of 1,000 euros to parents of a newborn who have an annual income of up to 40 000 euros.