Date: 08/09/2023
Author: Mr. X
The government of Giorgia Meloni has been disappointing for many conservatives and right-wing populists. The crushing victory of the Italian Right raised hopes among nationalists around the world and the fears of many progressives and media figures, with some calling her a “neo-fascist” or a “post-fascist.” Such concerns have faded as Italy’s first female Prime Minister has aligned herself closely with the Western consensus on Ukraine, as well as disintengling Italy from Chinese investmen. Instead of Italy tilting away from Brussels, Italy is now once again a core and reliable part of the European Union and NATO.
However, this is also what may be frustrating some of Meloni’s voters. One disappointment has been on immigration. Meloni campaigned aggressively against immigration, but has reversed course upon taking office, instead speaking about the need to increase legal pathways into the country. Like many right-wing governments, Meloni is tilting closer to economic conservatives now that she’s in office rather than many of her parties core activists.
Italy has also been forced to back down on a plan to impose a windfall tax on Italian banks. Earlier this week, the Italian government announced a tax on banks that was expected to cost financial institutions about 40% of the profits earned from higher interest rates. The result was a wholesale collapse of many banks.
Intesa Sanpaolo was down about 8.6%
Banco BPM was down 9%.
UniCredit was down about 6.7%
One of the key reasons why this decision was seen as uniquely devastating is that banks didn’t see it coming. Citi analysts presented a dire picture for the banking sector. “We see this tax as substantially negative for banks given both the impact on capital and profit as well as for cost of equity of bank shares,” said analysts led by Azzura Guelfi. “The new simulated impact is also higher than the simulation we ran in April.”
Prime Minister Meloni has defended the tax in principle, saying that her government “has approved several measures, the most important of which is the taxation on banks’ unjust margins.” However, the government also clarified that the windfall tax would not amount to more than 0.1% of total assets. Banks dutifully recovered some ground yesterday.
One of Meloni’s conservative allies has defended the tax. “Some bankers are regretting [the tax] but we are talking about an industry that is making billions and billions in profits without lifting a finger,” said Interior Minister Matteo Salvini. “Redistributing a small part of these profits is economically and socially justified.”
It may also be an astute political move. Meloni recently undertook a controversial welfare reform plan in order to kickstart the economy. Her approval rating is evenly divided in the country, with about 49% of the population in favor and 46% against.
However, what Thomas Friedman called “The Golden Straitjacket” still restrains right-wing populism, preventing the government from going as far as it wants to stand up for its base.
Mr. X is an investment analyst working in the Washington DC area who specializes in the intersection of business and public policy. After fifteen years working in politics, he writes on a classified basis for RogueInvesting.com to bring you news on what those with power are debating, planning, and doing
