Shares in Italian banks fell 1.2% in mid-morning trade, slightly underperforming the European sector, with investors weighing the prospect of a new government levy on the sector as it scrambles to finance next year's budget.

In an effort to reassure markets, ruling politicians have said any new contribution from banks should be agreed with the industry, and also involve insurance and energy companies.

"In a civilised country things get done once they have been agreed upon. Banks and insurers deserve respect, we must table a discussion with them," Economy Ministry Undersecretary Federico Freni said on the sidelines of an event on Monday.

Last summer Italy's conservative government sparked a sell-off in banking shares by announcing a shock 40% tax on income banks had pocketed from higher interest rates.

It was forced to backtrack hastily and eventually introduced an opt-out clause giving lenders the option to boost capital reserves, so that the measure yielded no proceeds.

Italy's main banking union FABI calculated the government could raise between 600 million and 1.3 billion euros from lenders were they asked to pay in taxes an extra 1% to 2% of their profits of the past two years - a scenario outlined by Sunday's Corriere della Sera newspaper.

Equita SIM analyst Andrea Lisi wrote on Monday that the impact on the sector would remain below 1% of market value even in the worst-case scenario of a 2% contribution applied to the profits of the past two years.

The contribution is expected to be on a voluntary basis, a person familiar with the discussion told Reuters.

In ruling out a new tax on banks, Foreign Minister Antonio Tajani, who leads the Forza Italia party within Prime Minister Giorgia Meloni's coalition, said at the weekend that banks could instead make a contribution to the state finances, adding the details were still to be worked out.

Marco Osnato, an economic adviser within PM Meloni's Fratelli d'Italia party, told Corriere della Sera on Sunday he had received positive feedback from banks in informal contacts over a consensual form of contribution.

(Reporting by Valentina Za and Giuseppe Fonte; editing by David Evans)