Surprise at Italy's actions

Lugano, Switzerland (GenevaLunch) - Italian tax authorities raided 76 branches of Swiss banks in 22 cities around Italy, 27 October, ostensibly checking to see whether the institutions were in compliance with reporting requirements on bank operations. Federal Counsellor Pascal Couchepin said on national radio that they “were desperate measures” and suggested that the social contract between the Italian government and its citizens was in “bad shape”.

Italians who travel to Switzerland overland have been subjected to unprecedented border checks, with closed circuit cameras and police dogs at the border. The Italian finance and economy minister, Giulio Tremonti, has said that he wants to “dry up” the banks in Ticino, where it is estimated that most Italians have deposited their money.

The Italian tax authorities declared a tax amnesty mid-September for Italians who have hidden their assets abroad and evade taxes. The authorities have said that those who repatriate off-shore assets will pay a flat five percent on them. The Italian government hopes to raise €5 billion this way. The amnesty deadline is 15 December, but most analysts expect it to be extended. Some speculated that the drive against the Swiss banks was to intimidate Italian customers to use Italian banks, especially if they repatriate their money.

President Hans-Rudolf Merz met in Ticino last week  with the canton’s banking executives to hear from them about the latest moves by the Italian government, but declined Tuesday 27 October to reciprocate as they had demanded. He criticized Italy’s “surveillance-state methods” yesterday in an inteview with Italian financial newspaper Il Sole 24 Ore.

Italy’s finances are in a parlous state. The governor of the Bank of Italy said in June that Italy’s public debt could rise to 120 percent of GDP soon, and that Italians could be paying extremely high levels of taxes to pay for it for many years to come.

Links to other sites: Le Temps, NZZ (Ger), The Economist

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