Italy leans on banks due to balance tight budget

Italy's government relied on the banks to help balance a very tight budget Tuesday, without a repeat of last year's aborted windfall tax that spooked the markets.

Far-right Prime Minister Giorgia Meloni's ministers are meeting late Tuesday to agree on the broad outlines of a 2025 budget which, because of Italy's membership of the EU single currency, must then be sent to Brussels.

As last year, they are seeking to balance electoral promises with the need to reduce deficit and avoid adding to Italy's huge debt pile.

The budget contains measures worth around 25 billion euros, of which banks are expected to contribute "three to four billion euros", deputy prime minister and foreign minister Antonio Tajani said.

But he insisted there would be "no new taxes" on the institutions, after the announcement last year of a 40 percent tax on bank "superprofits" made from the rise in interest rates sparked a backlash on the financial markets.

Tajani, leader of the right-wing Forza Italia party, described the tax -- which was swiftly watered down -- as a Soviet-style levy.

But joint deputy prime minister Matteo Salvini, from the far-right League, has said that if anyone has to pay more, "let the bankers pay and not the workers".

A government source told AFP late Monday that "there will not be an increase in taxes for individuals and businesses".

But in place of the windfall tax, the government is considering spreading out tax credits to which banks are entitled over time and increasing taxes on their executives' stock options.

Economy Minister Giancarlo Giorgetti had thrown a spanner the works in early October by announcing that the budget "will require sacrifices from everyone", from "citizens and small, medium and large companies".

After a brief reaction on the Milan Stock Exchange, Meloni said there was no desire to increase taxes and promising that "no new sacrifices" would be asked of Italians.

But Italy -- blacklisted by the European Union for its "excessive" deficits, just like France -- is under intense pressure to balance its books and reduce a debt close to three trillion euros.

The government has committed to reducing the public deficit to 2.8 percent of gross domestic product (GDP) by 2026, well below the 3 percent eurozone ceiling.

To curb spending, Rome is urging individual ministries to tighten their belts, to free up around three billion euros in savings.

Ministers are expected to allocate around 15 billion euros to maintain a cut in taxes and social security contributions for those on low incomes, an election issue dear to Meloni.