(Bloomberg) — Raising taxes on Austrian banks would be a “valid choice” for government negotiators trying to close the country’s budget deficit, according to European Central Bank governing council member Robert Holzmann.
Austrian lenders were among the biggest laggards in the Stoxx Europe 600 index of bank stocks Monday after a newspaper report said the next government may consider raising levies on the financial sector.
Erste Group Bank AG fell as much as 1.9% after Vienna’s Kronen Zeitung newspaper reported at the weekend that Freedom Party negotiators were pushing for a tax increase as part of discussions to form a new coalition government. Shares in Bawag Group AG also dropped on the news of the potential tax increase, a move which the conservative People’s Party has opposed.
Austria’s federal budget targeted €140 million of revenue last year from the so-called stability levy imposed on credit institutions. The tariff was cut from as high as €640 million in 2017 after a one-time, €1 billion payment from banks.
While a tax would be a “political decision,” it could help the potential nationalist-conservative government close fiscal gaps, said Holzmann, who was appointed Austrian National Bank governor with Freedom Party support in 2019.
“If you have a certain objective, and at the end of the day, a little bit of money is missing, I think thinking about a bank tax is a valid choice,” he said on the sidelines of a conference in Budapest. “But it’s a political choice and as a central banker I am obviously neutral in my pronunciation.”
At the same time, exploring solutions to the fiscal issue should “start on the expenditure side,” Holzmann added.
–With assistance from Jonathan Tirone.
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