Italy. Ministers on finance and banking. Debt increase checked. Foreign exchanges. Banking figures

«The Economist», 12 aprile 1924, pp. 787-788

Turin, February 5

Important speeches were delivered, on the eve of the general elections, by two financial leaders, Signor De Stefani, Finance Minister, and Signor Stringher, Director-General of the Bank of Italy.

The former’s speech was marked by the somewhat unexpected declaration that the financial year will close without any new internal debt: so we have improved from 11,864 million lire of new internal debt in 1920-21, to 6,283 in 1921-22, 2,265 in 1922-23, to nothing in 1923-24. This declaration goes a long way towards explaining the firmness of stock markets. While the sum total of internal debts is stationary, its composition is changing. The Treasury issued from July 1, 1923, to February 29, 1924, a sum of 2,704 million lire nine-years and 25 years’ bonds, and has repaid 2,309 million lire of short-dated bills from three months to five years, which were falling due.

«No new internal debts» is not technically equivalent to a declaration of a Budget equilibrium, which external debts toward Great Britain and United States may gravely imperil. At the present rate of exchange, and at 5 per cent. interest, the sum annually required for the bare interest service of the external debt would probably reach 5,000 million lire, an unbearable burden for which neither of the two creditor nations will presumably ask. For a complete budgetary equilibrium, from the British point of view, are perhaps wanting also the means for paying sums left over by previous financial years, of which the true value is not completely known. The position of public finance is, however, sound. Italy can face the future without uncertainty as to how to make both ends meet. Some important problems remain to be solved; but they can be viewed with equanimity, as we are on a firm basis.

The Finance Minister also indicated that the proportion between «permanent» and «total» tax income is increasing: from 79.68 per cent. in the second half of 1922 to 87.03 per cent. in the first half of 1924. So we are less at the mercy of extraordinary sources of tax revenue. He also showed that the number of new industrial, commercial, and professional taxpayers was 39,813 in 1921, 47,822 in 1922, and 107,909 in 1923. The taxing-net is filling with new fishes, so that the burden is more equally distributed. Sales of war stores, which gave 1,611 million lire in 1920-21, 1,186 million in 1921-22, and 956 million in 1922-23, will yield only 200 million lire in 1923-24. The Budget is now almost free from this extraordinary non-tax revenue. The State railway deficit fell from 1,258 million in 1921-22 to 906 million in 1922-23, and to less than 374 million in the current financial year, and is estimated at 110 million lire for 1924-25, including in the latter figure the deficit of new provinces hitherto excluded. The total number of civil and military State servants has been lowered, between July 1, 1923, and January 1, 1924, from 509,145 to 477,028, and their total salaries and wages from 4,859 to 4,562 million lire, to which will be added, next year, 65 millions saved by new system of pensions to retired servants.

Signor Stringher dwelt more on monetary and banking subjects. The rates of foreign exchanges in 1923 were characterised by more restricted fluctuations:

Whether the two leaders are aiming only at stabilisation, or also at revaluation of the lira, is not wholly clear. Perhaps their policy is not definitely settled. They keep revaluation in the background, and say that it will come gradually; but they assert emphatically that stabilisation is the most urgent necessity. How one aim is to coincide with the other is not stated.

Banks of issue were busier than ever in 1923. The yearly averages for the Bank of Italy were as follows:

The figure for December 31, 1923, is swollen by the inclusion of 2,564.6 million lire of credit granted to the Consortium for the salvage of Ansaldo concerns, Banca Italiana di Sconto, and Banco di Roma. This is a blot on a banking position which had been somewhat inflated since 1919. Industrial concerns and banking societies are rediscounting at the banks of issue in a measure which previously would have been deemed perilous, and for sums much higher than would be warranted by the devaluation of the lira. Signor Stringher seems to feel that the mass of banking paper will come to a good end. From the net profits of the Bank of Italy a sum of 100 million lire was deducted in 1923 to face losses on the said 2,564.6 million lire granted for salvage purposes. An additional sum of 391.8 million lire was deducted to the same end from the extraordinary tax on excess issue, which should have been paid into the reserves against probable losses. The liquidation of the salvage consortium ought to be finished at December 31, 1932. A Royal decree of January 1, 1924, has formally forbidden the consortium to discount other paper. The State will no more come to the aid – through the agency of banks of issue – of falling concerns.