Italy’s Central Bank Clashes With Government Over Cash Policy

Banca d’Italia

Italy’s central bank is warning the new government about the risks of a cash-heavy economy.

As new Prime Minister Giorgia Meloni’s government looks to ease rules governing the use of cash in the economy, Fabrizio Balassone, head of the structural economic analysis directorate of the Banca d’Italia, gave testimony in front of the Italian Parliament on Monday (Dec. 5), in which he warned that such moves could create opportunities for the black economy and tax evasion.

Discussing the government’s 2023 budget presented last month, which includes a proposal to raise the upper limit on cash transactions from 1000 euros to 5000 euros, Balassone said that 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.”

He pointed to data that suggests higher thresholds favor the “shadow economy” and said that “there is evidence that the use of electronic payments, allowing the tracking of transactions, would reduce tax evasion.”

Another change to Italy’s cash policy included in the budget is a plan to scrap fines for retailers who refuse card payments under 60 euros.

“These measures, contrary to what has happened overall in recent years, go in the direction of facilitating the use of cash,” Balassone said.

The proposal to drop fines for not accepting card payments was introduced against the backdrop of a deal the country signed with the European Commission (EC) in order to receive its share of the EU’s 2 trillion euros post-COVID-19 stimulus package.

One of the conditions attached to the first 21 billion euros of recovery fund money that Italy received this year was that Rome would introduce sanctions for retailers who refuse to accept card payments.

Francesco Filini, a member of Meloni’s Brothers of Italy’s party, questioned the central bank’s motivation for encouraging electronic payments.

According to Reuters, he said that “it is quite obvious that the central bank, an entity owned by the banks themselves, supports electronic payments,” adding that they generate revenue for banks.

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