By Giuseppe Fonte and Angelo Amante
ROME (Reuters) -Italy’s ruling parties looked close to a deal on Tuesday on raising up to 4 billion euros ($4.36 billion) from the country’s banks, overcoming tensions within the coalition ahead of a cabinet meeting to approve the 2025 budget.
Prime Minister Giorgia Meloni’s government needs to find around 25 billion euros to finance a raft of measures — primarily permanent cuts to income tax and social contributions for middle- and low-income earners.
Rome has said it will widen next year’s deficit to 3.3% of gross domestic product from an estimated 2.9% based on current trends, borrowing an extra 9 billion euros.
The rest of the package will be financed by spending curbs or tax increases elsewhere in the budget.
Deputy Prime Minister Antonio Tajani told reporters that banks might contribute between 3 and 4 billion euros, without clarifying the time frame over which the sum would be raised.
“We’ll see tonight,” he added, referring to the cabinet meeting scheduled for 8 pm (1800 GMT) to approve the measures.
Revenue-raising options include changing the taxation of stock options for managers, and altering the rules governing banks’ tax credits stemming from past losses, known as deferred tax assets (DTA), officials said.
Talk of a bank levy has swirled for weeks and has weighed on lenders’ shares in the absence of clarity from the government.
Economy Minister Giancarlo Giorgetti has said “sacrifices” must be made by those who can afford them, and a contribution from banks “shouldn’t be considered blasphemy”.
Tajani’s Forza Italia party – which makes up the ruling coalition alongside Meloni’s Brothers of Italy and Matteo Salvini’s League party – initially opposed any suggestion of a tax levy on banks.
DEFICIT TO FALL, DEBT TO RISE
Italy last year shocked markets by imposing a 40% tax on banks’ windfall profits, only to backtrack by limiting the scope of the levy and giving lenders an opt-out clause which meant that in the end it raised nothing for state coffers.
The government also plans to hike excise duties on diesel and may eliminate some tax breaks available to companies regarding the main corporate tax IRES, the officials said.
Italy is under an EU disciplinary procedure due to a budget deficit that came in last year at 7.2% of GDP, far above the bloc’s 3% limit and the highest ratio in the euro zone.
Last month the government pledged to lower the deficit to 2.8% of GDP in 2026, hoping this would allow Italy to exit the so-called ‘excessive deficit procedure’ the following year.
On the other hand, Italy’s debt, already the second highest in the euro zone, is seen gradually climbing over the next two years, reaching 137.8% of GDP in 2026 compared with last year’s ratio of 134.8%.
The EU’s recently revamped fiscal rules require a steady pace of deficit and debt reduction from 2025 over four to seven years.
To secure EU approval for a less ambitious seven-year budget adjustment, Italy committed to reforms in several policy areas, including making the tax system more efficient.
($1 = 0.9165 euros)
(Editing by Gavin Jones and Crispian Balmer)
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