Italy’s budget 2025: Breaks for low-income earners and bank levy

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Italy’s far-right government has approved a budget for next year of about €30bn as it reiterates its commitment to “place citizens at the centre”.

In order to financing the spending, the government expects to raise some €3.5bn from a levy on banks and insurers.

Late on Tuesday, Prime Minister Giorgia Meloni argued the tax would go towards improving Italy’s public services, notably the healthcare sector, to 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 on 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.

Pressure on to cut Italy’s deficit

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 did not release details of the new financial levy.

Some Italian media nonetheless reported that it would focus on temporarily removing deductions for lenders’ so-called deferred tax assets and increasing taxes on bankers’ stock options.

The minister revisited a prior plan by the right-wing government, which has repeatedly criticised banks for excessively profiting 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.

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

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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 €3tn.