Stock Market Recovery – Government Borrowing -Wheat

«The Economist», 24 giugno 1933, pp. 1357-1358

Turin, June 12

The feeling that the worst point of the crisis has been reached, the hope that something will come out of the London Conference, received striking confirmation when the Four-Power Pact was initialed at Rome. The Italian Press was unanimous in proclaiming the Mussolini Pact as the sure guarantee of a long period of peace in Europe. Markets, which were already on an upward trend, rose further. The Milan “Borsa” index for variable dividend securities, which, after a desultory rise to 108.20 in the first week of February (December, 1932=100), had again sunk to 101.72 in the week from April 18th to 22^nd, began to recover ground in May, reaching 106.37 in the week from May 22^nd to 27^th. Thereafter, the movement continued. A real boom seems, however, unlikely, when the market is bound to digest the continuous outpouring of bonds by public authorities. The State expenditure alone must be financed to the tune of about four milliard lire a year (3,867 million lire deficit in 1931-32, 4,200 in 1932-33 and 2,900 million lire estimated for 1933-34). The financing of State deficits is provided for through the Postal Saving Banks and the various Social Insurance Funds. Postal Bills alone gave to the Treasury 1,442.6 million lire in 1931, 2,037.4 millions in 1932 and 426.4 millions in the first quarter of 1933. The State Floating Debt is rapidly rising: from 1,618 million lire on June 30, 1928, to 5,492 on June 30, 1931, to 6,647 on June 30, 1932, and to 8,390 on April 30, 1933. Over and above the current budget deficits, the State is making big appeals to the market for investment purposes.

A few months ago the I.R.I. issued one milliard lire of bonds for reconstruction purposes. On June 1 there was an issue of 600 million lire 4.50 per cent, bonds, amortisable in 20 years, issue price 455 lire on 500 lire nominal, with three yearly prizes of one million lire each for the first five years of currency of the loan. As the proceeds of the loan will be used for the electrification of State railways, 1,000 free pass first-class tickets, for one month between July 1 and September 30, over the whole of the State railways will be drawn among the subscribers every year for the whole 20 years currency of the loan. The issue was a big success; 1,151 million lire were subscribed in 48 hours by 198,488 subscribers. Signor Jung proudly pointed to the big number of subscribers, which compared with 20,000 to 25,000, the corresponding figures of war loans.

An interesting index of the coming change of sentiments in economic circles is given by rumours current as to the possibility and usefulness of a rapid liquidation of the big mass of industrial assets held by the Sofindit and the I.R.I. These two concerns are practically one, as the I.R.I. has subscribed recently the whole increase of the capital of the Sofindit. The I.R.I. has thus become the biggest repository of industrial shares and bonds existing in Italy.

Agricultural recovery is slow. The very success of the wheat campaign provokes misgivings about the future of prices. In the eleven months from July 1, 1932, to May 31, 1933, wheat imports totalled 295,946 tons, against 594,470 in the corresponding months of 1931-32. It seems probable that an important wheat stock must be transferred to the next wheat year. If the coming crop is good, there is a possibility that internal production plus stocks will more than suffice. In various places offers for future wheat had fallen from the level of 1,000 to 800 lire per ton. Signor Mussolini, presiding at the Wheat Committee, has therefore announced that the 750 lire per ton duty shall be maintained; that foreign wheat shall be almost completely excluded from milling; that credit facilities shall be extended for wheat stocks; that corporative organisations shall consider the application of a policy of gradual sales. Wheat is a national crop; and it is of the utmost importance to prevent the diffusion in the great mass of agriculturists of the same sort of discouragement which is playing havoc among the small section of rice-growers.