Signor De Stefani’s speech – An Italian Geddes Committee -The Deficit for 1923-24 – New Debts after 1914 -Treasury Control – Economic Improvement

«The Economist», 26 maggio 1923, pp. 1194-1195

Turin, May 20

The great financial event of the week has been the speech of Signor De Stefani, Minister of Finance, at the Scala Theatre, in Milan. The interest centred in the final figure of the reduction of the deficit, which was the avowed aim of the Fascist Government to reach. The results of the work of a small committee may be summed up as follows: Net decrease in expenditure, 1,305 million lire; increased yield of revenue, 442 million lire; net reduction in the deficit, 1,747 million lire. The totals of revenue and expenditure estimated for the financial year 1923-24 are now, therefore, as follows:

These figures call for comment. In the extraordinary revenue are included 1,000 millions for German reparations, a more than doubtful item, from which it may be expendient to deduct 750 millions. On the other side, in the ordinary expenditure there are included 1,153 millions as interest on the sums due to Great Britain and the United States. It may safely be assumed that not a penny will be paid on this score, at least in the next financial year. This is a matter which will be eventually arranged between interested Powers, but it seems useless to budget next year for payments which will not be made.

The deficit of State Railways is estimated for 1923-24 at only 374 million lire. This may be, perhaps, too sanguine. And it may be that new unavoidable expenses may arise, which will add something to the deficit. Summing up, it seems probable that, with 750 millions less income than budgeted and 1,153 millions less cash expenditure, the Budget, even allowing for 400 millions unforeseen expenditure, will close with a deficit of about 2,616 million lire, as estimated by Signor De Stefani. Up to 1,500 millions, the ways and means to pay for this deficit are already provided, as the Government has announced its intention to pay no more war damages compensation in cash. Next year the sum of 1,500 millions, which is included in the above estimates of extraordinary expenditure, will be paid in the form of 25-year 3 1/2 per cent, bonds compulsorily given at par. The remaining 1,100 million lire deficit will be easily covered by nine-years Exchequer 5 per cent, premium bonds, which find in Italy a ready market at an issue price of 99 or 99 1/2. The new internal debt created in Italy every year since the war may then be calculated as follows (in millions of lire):

The greatest decrease took place from 1920-21 to 1921-22, when Signor Giolitti abolished the bread subsidy, the greatest scourge of our Budget. After that great feat the betterment was continuous. The last billions are diehards indeed; and Signor De Stefani deserves great credit for the valiant efforts to eliminate the causes which compel the Treasury to incur new debts.

He is distinctly optimistic; and, truly, the fact that the ordinary Budget shows a surplus gives stimulus to hopes. But are extraordinary expenses bound to decrease? Of the huge sum of 5,812.8 millions, the greatest item, 1,500 millions yearly for war damages in invaded provinces, will disappear in about six years. Another formidable item -1,318 millions of war pensions – will disappear also, if more slowly; it is estimated that the expenditure will fall below 1,000 millions in 1929-30, and below 500 millions in 1946-47. The railway deficit, estimated at 374 millions in 1923-24, should be cancelled in three years; and so will be cancelled the postal deficit of 81 million lire.

Signor De Stefani laid great stress on the efficacy of the British Treasury in checking expenses and controlling expenditure departments. All efforts to increase the powers of the Italian Treasury over spending departments are meritorious; and to that end Signor De Stefani has decreed that the departmental accountants shall no more be appointed by the spending Ministers, but by himself as head of Treasury, and shall be the subordinates of the Accountant-General of the State. Ministers shall no more have authority to order departmental accountants to countersign an order of payments or expenditure. Expenditure will be authorised only when bearing the consent of the Accountant-General of the State and his subordinate officials. Perhaps this seemingly little reform will be the greatest achievement of the new Government in financial matters.

Economic conditions in Italy, as seen by Signor De Stefani, are improving. Unemployed, after increasing from 88,101 at July 31, 1920, to a maximum of 606,819 at February 1, 1922, decreased to 498,606 at April 1, 1922; reached bottom with 304,242 at August 1, 1922; increased as usual in the winter to a maximum of 391,974 at February 1, 1923, only to decrease to 280,201 at April 1, 1923.

Imports decreased from 17,267 million lire in 1921 to 15,728 in 1922, while exports increased from 8,275 to 9,293 millions, the adverse balance thus falling from 8,992 in 1921 to 6,435 millions in 1922. In the last three months for which figures are available – December, 1922, to February, 1923 – imports increased by 296 million lire, chiefly owing to larger takings of raw materials – e.g., cotton, wool, coal, and metals; but exports increased 352 million lire, silk and cotton textiles and agricultural products contributing largely.

Railway traffics are also increasing; in the first quarter of 1923 11.8 million tons of goods were carried, against 9.5 million tons in the corresponding months of last year. Passengers were decreasing in numbers, in the last two months of 1922, but the total was gaining ground in the first two months of 1923.