Milton Friedman once warned that “nothing is so permanent as a temporary government program.” That’s the biggest risk for Italian banks from a surprise windfall tax on profits revealed this week by Prime Minister Giorgia Meloni’s ruling coalition.
A 40% tax will be applied this year on a complex calculation of the excess profits made between what banks are charging on mortgages and the lower levels paid out to savers. Banks always operate with some margin in their favor, but this spread has widened dramatically as the European Central Bank has raised its official rate by 4.25 percentage points over the past 13 months. ...