Budget Speech – Decreasing Deficit and Declining Note Issue -Appreciation of Paper-Money
Tipologia: Paragrafo/Articolo – Data pubblicazione: 06/08/1921
Budget Speech – Decreasing Deficit and Declining Note Issue -Appreciation of Paper-Money
«The Economist», 6 agosto 1921, p. 225
Turin, July 29
The Finance Minister, Signor De Nava, has made an emergency Budget speech in the Chamber of Deputies. A cloud was hanging over the probable results of the financial year just commenced, from July 1, 1921, to June 30, 1922. The ex-Premier, Signor Giolitti, had announced to the Senate, before the General Elections, that the deficit had been reduced from 14 to 4 milliards lire. Signor Soleri, the present Finance Minister, loosely talked some days ago, of a deficit of 7 milliards lire. The public was at a loss to know which of the figures was the true one.
The financial year 1920-21, the Finance Minister now says, closes with a deficit of 10,300 millions lire, or 4,000 less than the estimate made a year ago. The present financial year, 1921-22, was expected last year to give a deficit of 10,370 million lire. After the estimate was made, events took place which greatly changed the situation. I give below the principal causes of variation (in millions lire):
| Decrease in expenditure: Loss on bread Loss on State navigation
Increases in income: Income taxes Stamp and registration taxes Wine tax Customs Tobacco Additional tax for war crippled, widows, &c Post and telegraphs Exchange-gain for Customs duties Sundry tickets on State railways
Other increases of real over budgeted income
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| Increase in expenditure: Interest on debt Expenditure for reconstruction in new and formerly occupied by the enemy provinces War pensions Subsidy to private railways and tramways Increases of salaries and bonuses to public employees, out-of-work subsidies, public works, &c Loss on State railways and additional votes of credit
Decreases in income: Coffee
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If we deduct from the originally estimated deficit of 10,370 lire the difference between the probable gain of 8,124 millions and the loss of 2,728 millions, we obtain the new figure of about 5,000 millions lire of probable deficit for the current financial year. Public debt will increase, although at a lesser pace than in the past, when it increased from 9.8 billions at October 31, 1920, to 106,621 millions lire at June 30, 1921. Of this enormous sum, probably 22,000 millions are foreign debt, taken at the par of exchanges, due to Great Britain and United States. If we were to pay these foreign debts at the present rate of exchange, instead of 22,000 we should pay about 80,000 millions lire. In addition, there exist 84,000 millions lire of internal debt.
Of this internal debt, about 50,000 millions are funded debt, 25,000 millions Treasury bills and bonds at short dates, and 9,000 paper notes issued by the banks for Government account.
The paper issues in Italy went up as follows, from the beginning of the war (in millions of lire):
| Banking Notes (for Government Account and for Commercial Purposes) | State Notes (of 5 and 10 Lire, exclusive of Notes of 1 & 2 Lire) | Total | Number Index | |
| First quarter of 1914 | 2,200 | 400 | 2,600 | 100 |
| December 31, 1914 | 2,936.0 | 657.2 | 3,593.2 | 137.0 |
| 1915 | 3,968.0 | 1,082.1 | 5,050.1 | 192.5 |
| 1916 | 5,012.4 | 1,317.3 | 6,329.7 | 241.3 |
| 1917 | 8,425.0 | 1,748.8 | 10,173.8 | 387.8 |
| 1918 | 11,753.2 | 2,124.1 | 13,877.3 | 529.0 |
| 1919 | 16,281.3 | 2,271.3 | 18,522.6 | 707.3 |
| 1920 | 19,731.6 | 2,269.3 | 22,000.9 | 846.1 |
| June 20, 1921 | 17,757.0 | 2,270.0 | 19,827.0 | 762.5 |
After a continuous increase, which multiplied the original circulation almost by 8 1/2, we have obtained, in the first half of 1921, a decrease of almost 2,200 millions lire. This is an omen of better times, and of reduced prices. It is doubtful, however, how far it will be possible to go in the way of monetary parity.
Italy has made a very good beginning in the reduction of her Budget deficit and of her note issue; but, if dollars and pounds sterling gain more rapidly in buying power, it is even possible that our lira, although appreciating in terms of goods, will depreciate in terms of dollars or sterling. For the sake of international trade, some sort of international agreement upon the relative progress of monetary appreciation in various countries would be helpful.
