The tax on bank windfall profits recently announced by the Italian government has made waves. And not just in the stock markets, where the immediate impact on stock prices is felt by cross-border financial institutions. In Frankfurt, eyebrows were raised with the announcement of this new rate by the government led by Giorgia Meloni before the executive vacation period.
The European Central Bank (ECB) is preparing to send a letter to the government in Rome to censor them for not warning them The Bank of Italy and the European Central Bank itself would have taken this action, a specific obligation in the EU treaties that it should have complied with and not.
The European Central Bank has not yet expressed its opinion on the substance of the measure, indicating this could be detrimental to the country’s economy, According to Italy’s Corriere della Sera in the news on Friday, August 18th.
This is because, according to the ECB’s argument, reducing profit margins could create problems later in the bank’s ability to resist a potential deterioration in economic conditions – with the aggravating factor being diversions of money to fund public investment rather than stabilization mechanisms. Banks, such as the Settlement Fund or the Deposit Guarantee Fund, make Italian advances daily.
The tax proposed by Meloni’s government – a coalition of right-wing parties – wants to tax bank windfall profits in 2022 and 2023 at 40%. He advocated a measure he deemed necessary to “send a message about what a just state is.”
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