SITUATION ANALYSED

Press, Volume LXXI, Issue 21404, 21 February 1935, Page 13

SITUATION ANALYSED

Since the closing months of last year the Italian Government has been struggling to steady the lira on the foreign exchanges and to maintain the gold standard. On December 8 the mobilisation of all Italian foreign credits was ordered by a Cabinet decree.

The main cause of the trouble is the unfavourable b; lance of foreign trade, which has led to heavy withdrawals of gold on foreign account. In November and December the lira fell to its lowest point for the depression. The Bank of Italy, according to a writer in "Current History." lost about 1,000,000.000 lire of its gold reserve in 1934, in addition to a drop of 250.003 lire in foreign exchange holdings Italy wrs further embarrassed by her inability to draw her substantial international credit balance because of exchange restrictions in other countries. As a result the accelerated withdrawals of gold at the beginning of December seriously threatened the gold prrity of the lira. Severa, drastic decrees were promulgated for the mobilisation of foreign credits. All banks, corporations, and other legally constituted financial bodies were ordered to turn over their foreign credits to the National Exchange Institute and, along with private citizens, declare to the Bank of Italy all foreign or Italian securities held by them, even if deposited abroad. The Government *also assumed the right to dispose of these foreign credits -at current quotations should the dpmand for .gold such a step desirable. Tourists and other foreigners in Italy were unable to get me ou letters of credit, drafts, and travellers' checks until Finance Minister Guid" Jung issued - special order releasing funds for the purpose. Heavy penalties for infringement of the regulations, even to the extent of exile to the penal islands, are provided. Criticism of the Government's financial policv or speculation in li'"e by Fascists will be punished, accordin*, to an order of Achill- Starace, bv expulsion from the prrty. measures ended the storm of disapproval in Italy itself, but they could not still the criticism abroad, where the decrees are generally regarded as dangerous, ill-advised, and perilously near to indirect repudiation of the goM standard. The Government's action may indicate a change in the monetary and "conomic policies of Italy. Early in December Premier Mussolini hinted at "ueh a possibility when the Bank o? Italy raised its rediscount ra + ° from 3 to 4 per cent. A decree of December 19 applied the principle of th° earlier decrees to all payments "broad and to the taking of monpy out of the country. Pnrsor>= leaving Ttaly are restricted to 2000 lire in denominations of 100 lire or less.