Italian Deputy Prime Minister Matteo Salvini has proposed an extraordinary tax on bank profits, alarming Greek bankers who fear similar measures could be introduced in Athens ahead of upcoming budget negotiations.
Salvini has called for a five percent annual levy on the extraordinary profits generated by Italy's ten largest banks, covering a three-year period as the government prepares its budget for 2027.
While the proposal has divided Italy's ruling coalition, executives in Greece are closely watching the debate. Bank leaders in Athens recognize that the rationale cited by Salvini regarding elevated profit margins applies directly to the Greek financial market.
Proposed Banking Tax in Italy
Greek bankers are aware that proposals for a temporary tax on mounting banking profits have previously been submitted to Greek Minister of National Economy and Finance Kyriakos Pierrakakis. In his additional role as president of the Eurogroup, the council of eurozone finance ministers, Pierrakakis maintains oversight of European financial trends, where such windfall levies are growing more frequent.
Political pressure on bank profits is also building domestically in Greece. The main opposition party, PASOK, submitted a legislative amendment in December 2024 seeking a five percent contribution on pre-tax annual profits exceeding 400 million euros per bank.
The banking environment in Italy closely mirrors conditions in Greece, characterized by low deposit rates, surging interest income, widespread consumer dissatisfaction, and state guarantee programs supporting balance sheets. These factors helped push Italian banking profits to their highest level since 2008. Italian Prime Minister Giorgia Meloni defended the need several months ago to extract five billion euros from lenders, citing immense profits stemming from extraordinary market conditions.
Greek Market Concerns and Political Pressure
A similar picture has emerged in Greece, where the country's four systemic banks recorded combined profits exceeding 2.5 billion euros during the first half of the year. Full-year earnings are expected to surpass five billion euros, following 4.7 billion euros in 2025 and 4.2 billion euros in 2024. Greece's major lenders have achieved a return on equity between 15 percent and 16 percent, a performance envied across most of Europe.
These earnings have been bolstered by state guarantee programs for non-performing loans. Greece created its Hercules asset protection scheme by replicating Italy's GACS guarantee model, though analysts note the Greek framework provided even more favorable terms for commercial banks. Italy's GACS scheme backed transactions totaling 110 billion euros, whereas Greece's Hercules program guaranteed over 20 billion euros in non-performing loan transfers.
Comparing Guarantees and Interest Rates
Disparities in deposit yields are even more pronounced. In Greece, the average term deposit interest rate stands at 1.21 percent, compared to 2.26 percent in Italy. Low payout rates on savings were a primary justification when Italy previously imposed an extraordinary bank tax during the 2023 inflation surge.
At that time, rising central bank interest rates drove rapid increases in borrowing costs while deposit yields lagged behind, allowing commercial lenders to generate effortless returns at the expense of savers. The same dynamics continue to affect Greek depositors today.
Lessons From Italy 2023 Bank Tax
During the 2023 market intervention, Meloni's government surprised investors by announcing a 40 percent windfall tax on net interest income that exceeded specified historical growth thresholds. However, revenue fell well short of initial projections, raising roughly 2.8 billion euros instead of the anticipated 11 billion euros.
The shortfall occurred after strong stock market pushback prompted lawmakers to introduce an option allowing lenders to bypass the tax. Banks could avoid the payment by allocating 2.5 times the tax amount into non-distributable capital reserves, a choice embraced by most institutions. Italian banks attempting to distribute those reserved funds to shareholders now face an additional tax liability.
Widespread Windfall Taxes Across Europe
Windfall taxes on financial institutions have expanded well beyond Italy. Spain introduced a temporary levy on bank interest income and fees above specific thresholds in 2022, before establishing it as a permanent progressive tax ranging from one percent to seven percent in 2024. Lithuania enacted a temporary contribution in 2023 and 2024 on net interest and fee income exceeding 50 percent of a bank's four-year average.
Elsewhere in Europe, the Czech Republic instituted a tax on extraordinary bank profits during the energy crisis, while Belgium and Slovakia have imposed windfall bank levies in recent years. Meanwhile, Sweden maintains a permanent risk tax calculated on the liabilities of its major financial institutions.
