ECB Warns Italy’s Budget Plans Could Strain Banking Sector and Restrict Credit
The European Central Bank has issued a formal warning about Italy's draft 2026 budget, citing potential risks to financial stability. Proposed banking taxes—projected to generate €11 billion by 2028—may erode liquidity buffers and tighten credit conditions during an economically fragile period.
Bank profitability pressures could trigger deposit rate reductions, exacerbating systemic vulnerabilities. The ECB notes Italy's already-modest credit growth faces further constraints, potentially dampening private investment and consumption.