LIRA MOVES OFF GOLD

Press, Volume LXXI, Issue 21533, 24 July 1935, Page 11

LIRA MOVES OFF GOLD

ITALIAN CABINET

DECISION

SENSATIONAL CHANGE OF

POLICY

i WAR PREPARATIONS SAID

TO BE CAUSE

(i::it;ei> vr.KSa ahsociatiok— coi'Yi'.iuiiT./ (Received July 23, 9.20 p.m.) ROME, July 22. * The Government has suspended the 40 per cent, gold coverage for notes, because of the urgent need of money for overseas payments. The Rome correspondent of the "Daily Telegraph" says the decision to suspend the gold coverage was reached at a secret Cabinet meeting. The decision was not released until after the banks and bourses had closed for the day, so no reaction has occurred.

It is pointed out that the decision is entirely contrary to the official policy of maintaining a high nominal value of the lira, which Signor Mussolini has pursued ever since his famous speech at Tesaro in 1927, when he declared that Italy would defend the lira, and maintain its value, if necessary with blood. The' city editor of the "Daily Telegraph" says Italy's decision is the first blow to her finances from the projected Abyssinian campaign.

tThe action of the Italian Government, it was suggested by a leading economist last evening, might be due to either of two reasons. It was possible that a heavy decrease in Italy's gold holdings had brought them too low to sustain her present note issue, but it was more likely that Italy desired to increase her note issue, perhaps for anticipated war expenditure. Italy had made no secret of her wish to spend more money on public works and to develop industry, but it seemed probable that she was inflating her currency in view of approaching war with Abyssinia. 1