Stability of the Lira – Emergency Decrees – Tariff

«The Economist», 10 ottobre 1931, pp. 659-660

Turin, October 5

The first two weeks following the suspension of the gold standard in England may be described as a successful fight on the part of the Italian Government, the Treasury and the banks to save the convertibility of the lira from the world monetary turmoil. On the evening of September 23rd an official communique was issued from the Government and the Bank of Italy stating that no change was to be made in the stabilisation rate fixed by the decree of December 21, 1927. This communique, which was repeated with great emphasis on September 29th, was deemed necessary in view of the popular notion that the lira was fixed at the rate of 92.46 to the pound (the so-called quota novantd). It was officially stated that the true rate of stabilisation was 7.919 grammes of fine gold for every 100 lire, irrespective of the vagaries of sterling, the mark, or even the dollar. In the first scare, when gold standards tumbled down one after another, it appeared to some foreign observers that the lira was also doomed, as it was quoted at a discount of 5 to 6 per cent, against the dollar, 8 to 9 per cent, against the French franc, and even more than 10 per cent, against the Swiss franc. This situation, however, was short lived, for by the end of last week the exchanges had settled down just a little above the gold point, and a few bears in Paris and other foreign countries were obliged to search for cover with no lire available on the market.

The technical situation, of which the Bank of Italy quickly availed itself, was that Italy had no current foreign debts worth noting. Other lines of defence were utilised. On September 28th the Bank rate was increased from 5V2 to 7 per cent. On that day, also the Finance Minister issued a decree to the effect that no forward sale of any security could be received on the Bourses if unaccompanied by the deposit of the security sold or of 25 per cent, of the cash, and no forward purchase, if unaccompanied by a deposit of 25 per cent, of the cash. Speculative transactions were thus killed outright. On September 29th the Finance Minister was authorised to regulate transactions in foreign exchanges, and on the same day the Fascist Credit Confederation circularised rules obliging all banks to send to the Bank of Italy a statement of their foreign exchange holdings as well as those of their foreign associates, and to make inquiries as to the future exchange needs of their clients, limiting credits to those who are reputed to possess foreign balances or to be receiving foreign bills in payment of exports. No bank can buy on its own or its clients’ account foreign or Italian securities issued in foreign centres. Foreign exchanges cannot be negotiated for future dates, nor be sold to customers who cannot justify their request on commercial or other admissible grounds.

On September 25^th a new general tariff of 15 per cent, ad valorem was imposed on all goods, previously dutiable or free, entering Italy. The duty on coal is 10 per cent., and different rates have been fixed for oil and gasoline, while cereals, the duty on which had only recently been increased, and such goods as may be entitled to special treatment by virtue of existing commercial agreements, are excepted. The objective of the new tariff is primarily a financial one, for the Exchequer hopes to receive from it a net yield of some 800 million lire yearly. But it may also be regarded as the first reaction to the suspension of the gold standard in England and other countries. Whether the duty will counteract possible “dumping” as a result of the depreciation of the pound, or whether it will initate retaliation by other countries, remains to be seen. In the meantime, however, the General Confederation of Industry evidently has some misgivings, for on October 3 rd it passed a motion, worded by Signor Olivetti, urging, in very prudent language, the adaptation of the tariff to the necessity of maintaining international trade.