Italy’s government has unveiled a budget that aims to pull the country back within EU fiscal limits, and it is asking its financial sector to shoulder a sizeable share of the effort. The plan has set off political tension, sparked debate within the banking industry and raised questions about how far a state can lean on its lenders without unsettling the wider economy. With billions on the line, the stakes are high for Rome, the markets and Italian households alike.
A budget built on bank and insurance contributions
Italy’s 2026 draft budget includes a controversial measure requiring banks and insurance companies to contribute around €4.5 billion to public finances. According to Economy Minister Giancarlo Giorgetti, the package combines several mechanisms, including tapping into existing financial provisions held by banks and raising a local business tax. Giorgetti defended the plan as “digestible” for the sector, insisting it would not destabilise financial institutions.
The contribution is expected to help Italy bring its public deficit down to 2.8 percent of GDP – safely under the EU’s 3 percent threshold. Achieving this target has been a priority for Prime Minister Giorgia Meloni’s government, which hopes to demonstrate fiscal discipline while maintaining enough political room to fund social measures.
Political fractures and reluctant support
Securing the banking contribution required delicate negotiations within the governing coalition. The right wing League backed the plan enthusiastically, while Forza Italia resisted it until the final hours. Antonio Tajani, the party’s leader and deputy prime minister, celebrated the fact that the final text imposed no direct windfall tax on bank profits, something Forza Italia had strongly opposed.
Meloni, for her part, thanked banks for what she described as a “sense of responsibility” toward the broader economic picture. She argued that financial stability ultimately benefits lenders as well, framing the measure as a shared national effort rather than a punitive tax.
Cuts, incentives and investments
Beyond its demands on the financial sector, the €18-billion budget outlines several domestic priorities: family support, business competitiveness and relief for middle income earners. Over the next three years, about €9 billion will go toward tax cuts, largely targeted at the middle classes. A one year tax amnesty for 2023 is also included – a recurring Italian budgetary tool that often divides public opinion.
Pensions are set for a modest increase, with low income retirees receiving an extra €20 a month. Working mothers will see their monthly bonus rise from €40 to €60. Meanwhile, Italy’s strained public health system is promised a €5-billion boost in 2026, earmarked for hiring more than 6,000 nurses and 1,000 doctors and for raising nurses’ salaries by roughly €1,630 annually.
What the plan means for Italy – and for Europe
For Meloni’s government, this budget is a statement that Italy can honour EU fiscal rules while still funding social priorities. For the banking sector, it is a compromise that avoids harsher measures but still requires a significant financial outlay. Analysts note that imposing additional costs on banks risks affecting lending capacity, though Giorgetti insists the impact will be manageable.
The proposal must now pass through Parliament, where amendments are almost guaranteed. But whatever the final shape, the underlying message is clear: Italy is determined to tighten its accounts, and it expects its financial institutions to help shoulder the load. As Europe continues to navigate inflation, sluggish growth and rising public debt, Italy’s approach will be watched closely – both by other governments and by the markets that ultimately judge its credibility.
