The European Central Bank (ECB) is gearing up to criticize Italy over its unexpected windfall tax on banks, amidst growing tension between Christine Lagarde, the ECB’s President, and Italian Prime Minister Giorgia Meloni.
The ECB plans to send a formal letter to Ms. Meloni’s government, expressing dissatisfaction over Rome’s failure to notify the central bank prior to making this decision—a step that was obligatory. The unforeseen windfall tax, anticipated to generate €3 billion (£2.6 billion), caught both the bank and its president, Ms. Lagarde, off guard.
This policy, which involves a 40% tax on profits from banks’ interest income, was swiftly put into motion last week after a late-night cabinet meeting. This unexpected tax measure erased $10 billion in value from Italy’s domestic banks.
According to Italy’s Corriere della Sera newspaper, the European Central Bank in Frankfurt was kept in the dark regarding these plans. While the ECB lacks the authority to veto these measures, it has previously expressed disapproval of comparable proposals in Spain and Lithuania.
Ms. Meloni, Italy’s populist Prime Minister, has openly criticized the central bank’s interest rate hikes, contending that they might ultimately inflict more damage than inflation itself.
The ECB has announced that it will release its official stance on Italy’s tax measure in due time.
