Italy

«The Economist», 17 febbraio 1934, pp. 14-15

The year 1934 was marked by a keen effort to reduce the Budget deficit. In the three past financial years ending June 30, 1934, the average deficit reached 3,500-3,800 million lire, exclusive of an extraordinary sum of about 3,000 million lire spent in 1933-34 to pay anticipated interests and bonus to holders of 5 per cent, consols converted into 3.50 per cent, redeemable consols. The February conversion saved the Treasury about 800 millions net which, together with the 8 per cent, to 12 per cent, reduction in public servants’ salaries and minor economies, kept the deficit in the first six months of the 1934-35 Budget year within 1,074.7 million lire, against 2,307.6 millions in the corresponding period of the previous year. The deficit for 1935-36 is estimated at 1,657 millions. As a result of the successive deficits the public debt increased from 91,442 millions on June 30, 1931, to 102,622 millions on June 30, 1934, and 105,164 millions on December 31, 1934. The last report of the Chamber Budget Committee emphasises the importance of payments due in future years for public works, land reclamation, afforestation, etc., which it estimates at 20,422 million lire.

WAGES AND UNEMPLOYMENT. – Since the reduction in wages in 1931 there has taken place, contrary to current impressions abroad, no general drive for new reductions in hourly wages. The 8 per cent, to 12 per cent, reduction in April, 1934, was limited to public employees’ salaries. Reductions were sporadic. The index number of agricultural hourly wages (1930=100), was 83.2 at the end of 1931, 78.5 at the end of 1932, 76.5 at the end of 1933, and 75.2 in November, 1934. The corresponding indexes of industrial wages was 89 in 1931, 86 in 1932, 85 in 1933, and 81.50 in 1934. The average yearly general cost-of-living index (1930=100) was 90.3 in 1931, 86 in 1932, 82.3 in 1933, and 78.1 in 1934. It thus appears that the industrial workers’ standard of living is somewhat better now than in 1930; while agricultural labourers – who, however, are mostly paid in kind – have suffered in comparison. Of course, this is not the whole take; because earnings per family are more important to workers than wages per hour. Statistics published by the General Confederation of industry seem to prove that the number of hands employed is increasing. The index of employment (1929=100) rose from a minimum of 75.84 in January, 1934, to a maximum of 87.62 in September, against 72.40 and 83.39 in the same months of 1933. The index of hours worked also rose from 69.14 to 85.66 in 1934, against a rise from 65.80 to 83.29 in 1933.

Unemployment is decreasing. In agriculture there were 336,384 unemployed at the end of 1933 and 211,320 at the end of 1934; in industry 692,172 at the end of 1933, and 638,050 at the end of 1934; and in commerce and private transport 103,701 in 1933 and 112,335 in 1934. The total fell from 1,132,257 at the end of 1933 to 961,705 at the end of 1934. This reduction must be partly due to the drive in December, 1934, for “work-sharing” in industry, by which weekly hours of work were reduced from 48 to 40.

AGRICULTURE. – Crops were mediocre in 1934. The yield of spring maize increased from 2.4 million tons in 1933 to 2.9 in 1934; of summer maize from 0.2 to 0.3 million tons; of rice (raw) from 0.61 to 0.62; of sugar beet from 2.1 to 2.7; and of potatoes from 2.4 to 2.7. The yield of hemp was unchanged at 0.05. But the two most important crops in Italy, wheat and grapes, decreased: wheat from 8.1 million tons in 1933 to 6.3 in 1934, and grapes from 5.4 to 5 million tons. Prices were kept at a good level in the interests of farmers, mainly by high duties or by absolute prohibition of imports and by quotas. The price of wheat did not fall below 800 lire per ton; and the price of rice has been kept by the Rice Board above 500 lire per ton by means of export premiums.

INDUSTRIAL PRODUCTION. – A new index, calculated by the Corporation Department (1928=100), gives industrial production in 1932 at 73 (minimum) and in 1933 at 80-5. The following are the monthly figures of this new index. (See table at p. 649).

Industrial recovery has been progressive. Apart from minor industries, the maximum expansion is to be noticed in the building industry (+67 per cent.), in which entrepreneurs are anxious to finish building before December 31, 1935, when the 25-years’ tax exemption will end. Rayon (+29.4 per cent.) and electricity (+8 per cent.) also have good records.

INTERNATIONAL TRADE. – International trade appears to have touched bottom.

TRANSPORT AND TRADE. – To these improvements in the industry inland trade is apparently slow to respond. Goods carried by the railways remained in 1934 behind 1933 for the first nine months of the year. In the last quarter a slight improvement was visible. Actually, 24.7 million tons were carried in the first nine months of 1934, against 25.2 in the same period of 1933; and 8.7, against 8.5 in the last quarters. This unresponsiveness is perhaps due to transference of goods traffic from railways to the roads. The volume of sea-borne traffic in 1934, however, surpassed the 1929 level, the 1934 figure being 37.9 million tons for international and coastal trade, against 32.2 in 1933 and 36.8 in 1929.

The best symptom is the increase of imports, in so far as it is a token of industrial expansion. The last colums shows that there is no necessary connection between the so-called passive balance of international trade and losses of gold reserves. The biggest loss in 1931 was due to the credit and sterling crisis, which drew foreign gold deposits away from Italy.

MONEY MARKET. – The official rate of discount, reduced in 1933, was kept unchanged at 3 per cent, from December 11, 1933, till November 26, 1934, when it was raised to 4 per cent. The private commercial rate of discount remained stable at 3 per cent, to 3 1/2 per cent, for the first ten months of the year; and rose gradually to 3 3/4 per cent, in November and 4 1/2 per cent, in December. The rate on financial paper and the securities end-of-month settlement rates were more erratic. It was possible to raise money on State securities at as low a rate as 3 per cent.; and even on industrial equities the rate did not rise above 5 1/2 per cent. The rise was not due to any slackening in the volume of new savings, as the yearly increase in banks and saving-banks deposits, which was 2,900 million lire in 1930 and 4,300 millions in 1933, was still about 3 billions in 1934, although the Treasury bond issues of 4,000 millions in January and 2,000 millions in November absorbed a considerable slice of the new savings.

The official rate of discount appears to have been raised mainly in defence of the gold and gold exchange reserves of the Bank of Italy, which decreased by 1,540 millions to 5,796.5 millions between January 1 and December 10, 1934. As a result of this a decree of December 8th put the foreign exchanges market under strict regulations. On December 31, 1934, the reserve had risen to 5,883.2 millions.

If not buoyant, the Stock Exchanges have been fairly active. The index number of 34 leading shares (December, 1925=100) rose from 48.12 in 1932 and 58.65 in 1933 to 65.14 at the end of 1934. New public issues of shares, which in the previous three years averaged 731 million lire, amounted in the first ten months of 1934 to 1,177.2 million lire. The increase is mainly attributable, however, to financial reconstructions.