Italy U-Turns on Policy Supporting Cash Payments

The Italian government has scaled back plans to promote cash payments.

After announcing in its 2023 budget that it would scrap fines for merchants that don’t accept card payments, on Monday (Dec. 19) the government backtracked on the move.

“We intend to eliminate the measure on points of sales,” the Italian economy minister, Giancarlo Giorgetti, said during a testimony on the budget. He added that in its place, some sort of compensatory measures might be introduced to help shopkeepers pay card fees.

Initially, Prime Minister Giorgia Meloni’s government had sought to ease rules on the use of cash by getting rid of fines for merchants that don’t accept card payments under €60.

However, following criticism from Italy’s central banks, the government has pulled a U-turn on the issue.

During his testimony to the Italian parliament, Fabrizio Balassone, head of the structural economic analysis directorate of the Banca d’Italia, said that moves to discard limits on the use of cash “while not providing an absolute impediment to the realization of illicit conduct, represent an obstacle for various forms of crime.”

“There is evidence that the use of electronic payments, allowing the tracking of transactions, would reduce tax evasion,” he added, as well as warning that encouraging cash usage would benefit the “shadow economy.”

While the government has done an about-face on plans to ditch penalties for merchants that refuse to accept card payments, the other aspect of its pro-cash agenda remains intact.

Also announced in the budget, Italy intends to raise the upper limit on cash transactions from €1,000 to €5,000, a move that Balassone warned would inhibit the country’s efforts to tackle money laundering.

Meloni, head of the far-right Brothers of Italy party, has a history of criticizing Italy’s longtime efforts to encourage digital payments, calling them a “hidden tax” on families and small businesses. She had previously called limits on cash an attempt by the government to overstep the bounds of its power.

A report in the Financial Times said the move could prompt resistance from the EU, which has urged Italy to increase its digital payment use. And opposition politicians said Meloni would be moving the country backward.

For all PYMNTS EMEA coverage, subscribe to the daily EMEA Newsletter.