Italy. Resignation of signor De Stefani. Public finance. Stock markets. Duty on cereals. Wholesale prices

«The Economist», 15 agosto 1925, pp. 270-271

Turin, July 27.

Since my last letter of July 4th the Minister of Finance, Signor Alberto De Stefani, has resigned. He had been Minister from October, 1922, and his work in these 32 months will be long remembered. During his tenure of office the Italian Budget position was turned from a huge deficit to a small surplus. The last year of surplus was 1910-1911, when revenue exceeded expenditure by 11.6 million lire. The subsequent story is best told by the following figures:

The 1922-23 Budget was begun by Signor De Stefanìs predecessors; and successive Governments, from the suppression of the bread subsidy by Signor Giolitti onward, may justly claim a part of the credit for the improvement. Signor De Stefani was a strong opponent of new expenditure, and, so far as he could go, worked against Protection. On leaving office he was able to state that the Budget for 1924-25 was closed with 209 million lire surplus. His successor, Senator Volpi, does not come, as did Signor De stefani, from the ranks of university professors, but from business circles. He was a director of Banca Commerciale Italiana, president of the Società Adriatica l’Elettricità, a much-esteemed practical administrator, and until recently Governor of the Lybian Colony.

No great changes were announced by Signor Volpi, but he is endeavouring to keep himself in close touch with banking and business circles. Signor De Stefani was rather drastic in his handling of Stock Exchange machinery. In a well-meant endeavour to revalue the lira, he shook financial markets; the lira, instead of improving, followed the slump in securities, and fell from 116 to the pound sterling to 133 lire in the month of July. Money became dear, and securities, especially speculative issues, went from bad to worse. July 23rd was a new black day. Banca Commerciale shares, which closed at 1,530 in June – and had already lost some 200 points from the highest level touched in February – went down to 1,390; Snia Viscosa, after rising as high as 450, were at the end of June at 334, and continued to be had at 240 on July 23rd. Small operators had to sell at almost any price, as it was rumoured that money would be extremely scarce at the settlement. However, as the market was almost cleaned, settlement was easy, and markets recovered.

Closing prices were generally higher by 20 to 30 points than the bottom of July 23rd. The first fiscal act of the new Minister was favourably received by the Stock Exchanges – i.e. the abolition of the tax of 15 per cent. on dividend on bearer securities. The tax was originated in 1920 as a means to induce security holders to inscribe them in the books of companies. Bearer securities were always in Italy a great stumbling-block against taxes on total income. From the business point of view, the suppression of the tax is favourable to the easy sale and marketing of bearer securities. Signor Volpi also proposed to reinstate the Customs duty on wheat and other cereals at the pre-war rate of 75 lire per ton for wheat, 115 lire for wheat flour, 13 lire for corn, 31.50 for corn-flour, & c. The purpose of the duty is to promote wheat production and diminish the need for importing wheat from foreign countries. A great pro-wheat campaign was initiated recently by Signor Mussolini, and experts were appointed to suggest means to improve technical methods of growing cereals.

Bachìs index number has risen by 16.7 per cent. On the 1913 basis the general index was 682.6, on the 1901-1905 basis 860.1. There continues, notwithstanding this rise, a lag between home and external prices. If we multiply the index 682.6 for June by 0.19, which is the present gold value of the lira, we get internal prices of 130, against 160 in the United States, Great Britain, Netherlands, and other gold countries. Living is cheaper in Italy than in gold countries; and that fact is not the least obstacle against a speedy return to a gold system.