Italy. Stock exchange troubles. Suspension of new regulations. Revival of speculation. The problem of revaluation. Unfavourable reception of the Churchill budget

«The Economist», 9 maggio 1925, pp. 915-916

Turin, May 4

All’s well that ends well; but great was the turmoil in the Italian Stock Exchanges, almost to the eve of the carry-over day, April 23rd. The Bachìs index number of industrial, commercial, and joint-stock bank shares, which had reached 146 at the end of February (basis 100 = December, 1918), receded to 134 at the end of March. The most buoyant groups went down drastically: cotton securities from 623.4 to 559.6, artificial silk and silk-waste from 673.8 to 581.0, land and houses from 316.2 to 276.2.

The liquidation of early April caused even more anxiety and almost panic. In the first days of April orders of sale at the best (or worst) prices obtainable were pouring into the market. The Government felt obliged to close the Bourses from April 9th to 13th. In the meantime, as operators were complaining of the one-sided Section 4 of the Decree of February 28th, which obliged buyers to pay in cash 25 per cent. of the prices of securities bought for the end-of-month settlement, a new Decree of April 6th extended the 25 per cent. deposit also to speculative sales, so that a just balance should be maintained between sellers and buyers. This sort of compensation handicap on the shoulders of buyers and sellers was of no avail to restore confidence in the market. At last Premier Mussolini felt obliged to intervene. Several meetings between Ministers, permanent Treasury officials, bankers, and Stock Exchange brokers were held at Rome and Milan. Another interruption in the Bourses daily sessions took place after April 15th, and the final outcome was as follows: – (1) The deposit of 25 per cent. cash by Stock Exchange operators was to be no longer compulsory. Stock Exchange committees were authorised to suspend the regulation, and all committees did in effect suspend it at once. (2) Facilities were given by banks of issue to carrying over and liquidation in the Exchange market. Money was made very easy, and the rates for carrying over were even lower that at the end of March. Against rates of 8 to 8 1/2 per cent. for March, money was easily obtainable in the last days of April at 7 to 8 per cent. and even lower. As a consequence of the elimination of the objectionable regulations, quotations are again on the up-grade. Among the most spectacular fluctuations, one may quote the General Trieste-Venice Assurance shares, which from 18,000 lire fell to 10,000 to rise again to 14,500; Fiat from 550 to 450, and again to 520; Chatillon (artificial silk) from 500 to 330, and up to 400; Banca Commerciale Italiana from 1,650 to 1,350, and again to 1,550; and so on.

Recent events have taught the lesson that the stabilisation or restoration of the lira is not to be gained by direct intervention in the money market. The Stock Exchange regulations had the well-meaning aim of checking the speculative mania, of decreasing the demand for paper money, and of facilitating the reduction of paper issue. The sensitiveness of the market proved stronger; the crisis alarmed everyone; captains of industry feared difficulties in raising much-needed capital; and the Government was obliged to authorise banks of issue to furnish funds to the market. Total paper issues increased, therefore, from 19,870.6 millions lire at the end of February to 19,993.4 millions lire at the end of March, notwithstanding that the issue on account of the Treasury and other public bodies had decreased by 548.3 million lire. Perhaps the end of April figures, when published, will show a further increase in the total paper issue. On the surface, a failure of a well-aimed enterprise. At the meeting, held on April 22nd, of the representatives of Joint Stock Companies, the president, Signor Alberto Pirelli, echoed the almost unanimous voice of the industrial classes when he said that those classes favour the Government policy of opposing every further devaluation of the lira, without, however, desiring a rapid appreciation. They prefer stabilisation; not, however, at any point arbitrarily fixed. Signor Pirelli hopes that the point can be varied from time to time, with the utmost caution, on the upward grade, until a point will be discovered which could be the final one, and at which the lira can be legally stabilised.

The Churchill Budget has been read in Italy with no small misgiving. Motor-cars, natural and artificial silk are among the greatest assets in the Italian balance of international trade; in the first two months of 1925 the total number of motor-cars exported amounted to 3,486, against 2,454 in the corresponding periods of 1924; the exports of raw silk rose from 840.6 tons in the first two months of 1924 to 1,046.3 in the same period of 1925; tissues of pure silk from 105,256 to 122,921 kilograms; tissues mixed with silk from 130,742 to 183,567 kilograms; artificial silk and waste from 738,126 to 1,094,631 kilograms. In industrial circles there is a growing dis-satisfaction with the sudden obstacle presented to Italian exports in the hitherto free British market. Statistics are being circulated which show that Italy had gained supremacy in Europe in the artificial silk industry with 12,000 tons produced in 1924, against 4,600 in 1923; Germany was a good second with 9,000 tons, and France and Great Britain went at the third place with 6,300 tons. Italy hopes that in 1925 she will surpass even the United States, which in 1924 produced 22,000 tons. A natural resentment is felt against a closure which menaces the future of the new avenue which enterprise and hard labour has disclosed to Italy. Also the natural silk industry of Como is alarmed. The number of power-looms increased in Italy from 12,000 in 1917 to 19,000 in 1925, to which may be added 5,000 hand-looms. Of the 1,000 millions lire worth of silk tissues made in Italy, roughly 350 millions lire used to go into Great Britain. It is truly unfortunate that such a cause of friction should arise between Italy and Great Britain, and it is to be hoped that Free Traders can reduce and postpone the menace to our industries.