Italy

«The Economist», 1 giugno 1935, pp. 1246-1247

Stock exchange and industrial recovery – May has been characterised by a continuation of the rise in variable dividend securities on the Stock Exchange. The index number of the Milan Council (1925=100) has risen from 48.12 at the end of 1932 to 58.65 at the end of 1933, 65.14 at the end of 1934, and 70.43 on March 30, 1935. On May 11^th the index touched 75.38. Then a Treasury order extended the compulsory deposit of 25 per cent. cash, which was already compulsory for all purchases and sales of industrial securities for monthly settlement, to all carry- overs (riporti) on shares. The order caused a sharp recession on the market, and on May 18th the index was down at 72.26. The Treasury subsequently agreed that deposits in Government stock, instead of in cash, should be authorised, and that the deposit should be required only for speculative transactions.

As the Finance Minister observed in his Budget speech, the rise in ordinary shares is the logical sequel of the improvement in the industrial situation. The general index of production (1928=100) was 97.1 in February, against an average index of 88.3 in 1934, 80.5 in 1933, and 73.0 in 1932. When share prices are rising, fixed interest securities are usually somewhat neglected. Nevertheless the issue of 1,000 million lire one-year 4 per cent. Treasury bills, announced yesterday, has been a success. The issue can be described as a new departure, as no ordinary (viz., for one year or less) Treasury bills have been issued since the autumn of 1926, when the huge amount of those bills then outstanding was compulsorily converted into 5 (now 3.1/2) per cent. Consols.

THE PUBLIC DEBT: In the course of his speech the Finance Minister referred appreciatively to an editorial note on the Italian public debt in the Economist of February 23rd. According to the Minister, the increase in the public debt between June 30, 1922, and June 30, 1934, is not 50,000 million lire, but only 31,000 millions. The difference seems to apply not to main public debt (consols, redeemable and floating debt), estimated both by the Economist and the Finance Minister, at 104,200 millions, including the Morgan Loan, but to the other items in the total. There is one item in your calculation, that of 1,773 millions due to the Bank of Italy, which probably ought not to be included at all in the Public Debt total, since nobody includes in that total the theoretical sums due is consequence of war debts settlements to Great Britain and the United States. This 1,773 millions will disappear when an all-round international settlement of war debts can be achieved. The deferred payments’ present value, which the Economist estimates at from 30,000 to 32,000 million lire, is calculated by the Minister at 24,000 millions. This last estimate is understood to be the nearest possible approximation to an exact figure in this difficult field.

The Finance Minister specially explained the point that against the big increase of 31,000 million lire in the public debt, there is also an increase in the State’s assets: 17,293 millions of public works executed wholly by the State; 5,815 millions of grants in aid to public works executed by other public or private bodies; 6,018 millions of investments in the State Railways; or a total of 29,126 millions. And to this should be added from 5,000 millions to 6,000 millions which were invested, as a condition of the grant of the above 5,815 millions, by the private and public bodies concerned. In short, Mr J. M. Keynes and Mr Lloyd George, the apostles of gigantic expenditure on public works as a means to recovery, should take Italy as their object lesson. The most interesting conclusion of this discussion is that Treasury statisticians are to elaborate a complete statement of the capital liabilities and assets of the State, with estimates of the repercussions of public expenditure on the national wealth.

A sequel to the decrees enjoining the compulsory declaration of foreign securities held by banks, companies, institutions and private citizens, was published on May 20th. Foreign securities, it was then decreed, had to be deposited within twenty days at the Bank of Italy, banks which are agents of the Bank of Italy, or any other bank to the account of the Bank of Italy. Holders can freely sell or transfer these securities, but must transfer to the Bank of Italy the proceeds of sale, against payment in lire. The Foreign Exchange Institute has thus been more and more charged with the duty of an Equalisation Fund and also with those of a quasi Public Trustee and Bureau for the sale of foreign securities.

Another big step in the centralisation of foreign trade and foreign exchange business has been taken with the creation of the office of Superintendent of Foreign Exchange (Sovraintendente allo scambio delle valute), to be directly responsible to the Prime Minister. The multiplication of quotas, clearings, compensated exchanges, restrictions on the sale of exchange, etc., has caused the creation of many offices, sometimes mutually interlocking, and all retarding business.