Italy's New Financial Blueprint Targets Insurers and Banks
Italy's recently instated far-right government has unveiled its budget plans, totalling approximately €30bn, putting its citizens' needs at the forefront of its fiscal policy. However, financing this ambitious public spending plan involves a substantial €3.5bn expected to be raised through a new levy targeting insurers and banks.
Decoding the New Fiscal Measures
During a press conference, Economy and Finance Minister Giancarlo Giorgetti elaborated on the additional charges for insurers and banks, suggesting: "Someone would call it an extra profit (tax), I call it a sacrifice." This move will significantly impact the CEOs of insurance firms, potentially costing up to €1.3bn in levies, while banks are projected to contribute an additional €2bn.
The specifics of this new insurer levy have yet to be disclosed by the officials. Even amidst these new financial burdens imposed by the 2024 Italian Budget, the insurance sector remains cautiously optimistic about future prospects.
The growth trajectory for Italy’s insurtech sector is impressive, with predictions indicating a jump to as much as €30bn by 2030 from just €1.9bn in 2020. Simultaneously, Italy's embedded insurance market - which merges insurance directly into the purchasing process of goods or services - is projected to surge to €60bn by the end of the decade, indicating substantial growth opportunities for companies involved in this sector.
The banking industry is also facing stringent new measures, with Italian media outlets reporting that the government plans to temporarily eliminate deductions for lender’s so-called deferred tax assets and hike taxes on banker’s stock options.
Balancing National Benefits and Market Stability
This week has seen the revival of a previous tactic by the government to impose extra financial contributions on banks and insurers, echoing earlier criticisms against banks for profiting excessively from higher interest rates. An earlier attempt to implement a 40% windfall tax on banks faltered last year after initiating a significant selloff in Italian banking stocks, ultimately leading to the withdrawal of the plan.
Despite past market anxieties, Vice-Premier Antonio Tajani has expressed confidence on social media platform X that the revised levy will "not frighten the markets." Prime Minister Giorgia Meloni has also supported the plan, arguing that the additional tax revenue will help enhance Italy's public services, especially healthcare, for the benefit of the country's most vulnerable groups.
Strategising Within EU Guidelines
In presenting next year’s budget, the Italian government is working to deliver on their electoral promises while aligning with the European Union's fiscal expectations. The budget law for 2025, approved just before the mid-October deadline for EU submission, still awaits the Italian parliament's final endorsement, expected later this year.
Giorgetti faced immense pressure to balance the fast-paced reduction of Italy’s deficit, closely monitored by the EU, with the government's elaborate electoral promises. To accommodate the new fiscal measures, Italy's budget deficit is set to increase to 3.3% of the gross domestic product, up from the previous estimate of 2.9%.
Additionally, the budget introduces mandatory insurance requirements for companies against damages from natural disasters and catastrophic events from 31 December 2024. This policy could further stoke the growth of the insurance sector, adjusting to the heightened risk management needs in response to increasing climate-related events.
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