New Railway Issue – Business Recovery – Financial Reconstruction

«The Economist», 29 luglio 1933, pp. 230-231

Turin, July 17

In the past week the outstanding financial event was a second issue of 600 million lire 4.50 per cent. 20-year amortisable bonds for the electrification of State Railways at the price of 91 per cent. The yield works out at 5.66 per cent., exclusive of three yearly one million lire premiums for the first five years of life of the loan and 1,000 yearly first-class one-month vacation free tickets on the State Railways. The issue was a big success. In ten hours the subscriptions exceeded 1 billion lire, and when they were closed, subscribers were more than 180,000. The deficit for the first eleven months of the fiscal year 1932-33 amounted to 3,782.2 million lire, against 2,249.7 millions in the corresponding period of 1931-32. As usual this is the theoretical or “accounting” deficit, viz., the difference between revenue accrued or to accrue and expenditure made or to be made on account of the appropriations of the current year. “Real” deficit, viz., difference between revenue cashed and cash issued is much less: 2,166.1 million lire in the same period; and can be easily covered by the excess of deposits in the postal savings banks and other public Funds administered by the State Bank (Deposit and Loans Bank).

The policy of public works has had, according to a recent announcement, a signal success. The number of unemployed decreased in 1931 from 722,612 in January and 765,325 in February to 573,593 in June (minimum). In 1932 it decreased from 1,051,321 in January and 1,147,945 in February to 905,097 in June (minimum). In 1933, however, it fell from 1,225,470 in January and 1,229,387 in February to as low as 883,621 in June. The decrease between February and June has therefore grown from 191,732 and 242,848 to 345,766. The General Confederation of Industry adds that during the month of June 463 industrial establishments, employing 4,838 men, closed, but 868 new ones were opened, employing 9,468 men. The wheat harvest is nearly finished. Official data have not as yet been published, but reports are generally very favourable. A strong campaign has been started against hurried sales by farmers. Saving banks and other credit organisations offer to advance 900 lire, less interest and storage charges per ton, and farmers are being encouraged to wait for a rise in prices.

Indices of economic activity are in the main improving in Italy. Production in the first months of 1933 increased compared with 1932, as follows: – Iron sheets, 16.42 per cent, (four months); pig iron, 9.06 per cent, (five months); steel, 19.54 per cent, (five months); cement, 22,36 per cent, (four months); superphosphates, 61.29 per cent, (four months); rayon, 1.70 per cent, (four months); paper 7.16 per cent, (four months); electrical energy, 8.84 per cent, (four months). Allusion has already been made to this year’s substantial decrease in unemployment.

For international trade, against a total turnover of 37 billion lire in 1920, the figure for the first five months of 1933 is reduced to 6.2 million lire. The public draws some comfort from the observation that in the same five months imports have decreased from 3,743.2 to 3,123.4 million lire, while exports have only fallen from 2,762.6 to 2,513.0 million lire. Another figure calculated by the General Confederation of Industry is even more illuminating, viz., that the greatest decline in imports took place, owing to good crops and good farming, in foods, whose imports in January and February fell in quantity to 59.36 and 57.67 per cent, respectively of the 1925 basis; while raw material imports increased to 134.46 per cent, and 106.45 per cent.

Postal saving banks deposits increased only by 530.8 million lire in the first four months of 1933, against 649.6 millions in the corresponding period of 1932; but ordinary saving banks deposits increased by 417.9 millions, against 201.8 millions. A few instances of the reconstruction process taking place in Italy can be quoted. A year ago the Italian Gas Company collapsed. The task of reconstruction entrusted to the new president, Senator Frassati, was formidable. After a year of strenuous work he was able to tell the shareholders that the share capital, after being reduced to 26 million lire, had been increased again to 260 million lire; banking overdrafts are reduced from 455 million lire to practically nothing, and in their stead a long-term ten years’ 5V2 per cent, loan of 140 million lire has been granted by the I.M.I. (Istituto Mobiliare Italiano). The creation of the I.M.I, is proving successful.

In the presence of Signor Mussolini, Senatore Mayer described the first year’s working of the Institute. On March 31, 1933, the results may be summed thus: Loans requested, 2,805 million lire; loans granted, 558 million lire; accepted in principle, 43 million lire; under examination, 219 million lire. It was possible to float 500 million lire 5 per cent, bonds without having recourse to the State guarantee. The growth of the National Insurance Institute was also described recently by the President, Senator Bevio-ne. Created by Signori Giolitti and Nitti, amid much opposition, as a life Insurance Monopolist Institute, it was transformed in 1923 by Signor Mussolini and was given the character of a public institute freely competing with authorised private companies. The progressive growth was as follows at the end of the first (1913), tenth (1922) and twentieth (1932) years of working: – Number of contracts, 140,000, 542,622 and 1,052,136; capital insured, 936, 4,150 and 11,465 million lire; premiums received during the year, 34, 190 and 519 million lire; reserves, 168, 731 and 3,167 million lire. The Institute is thus today a strong link in the chain of public institutes, which consists of postal savings banks, ordinary saving banks, deposit and saving banks (Cassa Depositi e Prestiti), the Banks of Naples and Sicily, land and real estate banks (Monte dei Paschi of Siena, San Paolo of Turin, etc.), and social insurance institutes.