Italy's Cap on Cash Payments

When Italians pay the rent every month, many go to the ATM and take out wads of cash, which most landlords prefer over checks. Newly appointed Prime Minister Mario Monti wants landlords, tenants, and Italians of all sorts to stop using so much cash, a habit that makes it very easy to evade the taxes needed to shore up Italy’s dire finances. So on Dec. 4, Monti banned cash payments of over €1,000 ($1,340). As part of a wide-ranging emergency decree, the cash cap takes effect immediately, even though Parliament must formally vote on it later on.

Monti must now deal with the wrath of millions of Italians who use euro notes to renovate their homes, host wedding receptions, and pay for family vacations. Italy loses more than €100 billion in unpaid taxes every year. It also loses €10 billion every year from increased security and labor needed to process cash transactions, according to ABI, the country’s banking association. “What we need,” Monti told reporters on Dec. 5, “is a revolution in Italians’ thinking.” The same day he was booed by a minority in Parliament after he mentioned the cash limit.