Bank Tax Highlights Social Not Fiscal Conservative Nature Of Gov't

The decision by Italy's right-wing coalition to implement a 40% windfall tax on excess bank profits in 2023 has come as a shock to markets, with Italian bank stocks hit hard in early trading (see here). The rightward lean of the Italian gov't, led by PM Giorgia Meloni's Brothers of Italy (FdI) had led many to assume that it would be a more pro-business, free-market gov't than the 5-Star/Democratic Party administration that proceeded it.

• However, the two major forces in the gov't, the FdI and Deputy PM Matteo Salvini's League, exist as national conservatives and populist nationalists respectively. As such, their policies (domestically at least) will be more focused on socially conservative legislation in the areas of immigration and families than in fiscally conservative areas such as spending cuts or promoting an improved Italian business environment.
• The type of action taken by the Italian gov't could prove a harbinger of other national conservative parties in Europe that are seeking to gain power (e.g. Vox in Spain, Marine Le Pen's National Rally in France, the Alternative for Germany), with a focus on social rather than fiscal conservatism and as such a greater prospect of populist measures such as windfall taxes or increased taxation on businesses/high earners.