ROME — Italy’s banks and insurance companies are to play a central role in funding the 2026 government budget. The Draft Budgetary Plan (DBP) submitted to the European Commission calls for a €4.4 billion contribution in 2026 — equal to 0.19 % of GDP.
The financial sector’s contribution is to come via the extension of a measure introduced last year: a freeze on tax credits (deferred tax assets, DTAs) that banks would normally use to offset future tax liabilities. The Italian banking association ABI confirmed this week that it has agreed to maintain the mechanism in support of State revenues.
According to the DBP, the same 0.19 % of GDP target will apply in 2027, but the burden is to ease to 0.10 % in 2028 — cumulatively raising about €11 billion over the three years. Some observers view this as an effort to spread the load moderately over time.
Budget levers: tax cuts, health, public pay
The DBP does not rely solely on the financial sector. It envisages expansionary measures of roughly €18 billion — financed in part via the contribution of banks and insurers.
Key elements include:
- IRPEF cut in the “middle band”: The second income tax bracket (for earnings between €28,000 and €50,000) would drop from 35 % to 33 % starting in 2026.
- Health sector boost: An additional €2.4 billion is earmarked for health in 2026.
- Public sector wage rises: Around €2 billion is reserved for wage adjustments in the public sector.
These choices reflect the government’s dual aim: to stimulate domestic demand while maintaining fiscal balance.
Broader fiscal and growth context
Italy is aiming to nudge its deficit downwards: the 2026 budget is expected to hit the EU ceiling of 3 % of GDP, with further contraction thereafter. At the same time, the government expects modest growth — around 0.7 % in 2026 — and faces headwinds from international developments such as U.S. tariffs.
Still, debt remains a central concern. The public debt-to-GDP ratio is projected to rise to 137.4 % by 2026, a level among the highest in the euro area. Some analysts caution that overly aggressive spending or tax cuts could unsettle markets — though many expect bond yields (on BTPs) to remain relatively stable under the plan.
