FINANCE AND COMMERCE

Press, Volume LXXV, Issue 22765, 18 July 1939, Page 11

FINANCE AND COMMERCE

ITALY’S ECONOMIC POSITION EFFORTS towards balanced finance 1 J. • Italy, after a year, can now once more eat white bread instead of the dark bread (baked partly from maize flour) which was obligatory since May, 1938. According to the first notification (“Agenzia Economica Finanziaria,” May 10), the admixture of maize .flour was to cease in order to conserve the required supplies of maize for animal fodder and for “polenta” (the porridge eaten in Northern Italy).' According to later notifications, the sale of pure wheaten bread was permitted because of the increase in available stocks of wheat, said now to amount to one and a third million tons, against a bare million last year, with prospects for an excellent harvest.

Both reasons may, in fact, be valid the need to be sparing with maize and the possession of more adequate stocks of wheat. At the same time as wheat bread is restored to the consumer sales of coffee are subjected to regulation. The sale of unroasted cogee Or cogee roasted and ready ground is henceforth prohibited. So is the. : sale of coffee substitutes with an admixture of coffee. Italians are permitted to ask over the counter for unground roasted coffee, but the Fascist Party secretary has called on all those who belong to the organisations of the regime .not to drink coffee or to drink as little as possible in order i to "do down” the countries which insist on being paid for coffee with gold instead of taking Italian goods. The Minister for Exchange Control, Dr Guarneri, has now made it clear that he has to insist upon savings in i the import bill, such as the £1,500,000 i odd which is Italy’s annual expenditure on imported coffee. For years Dr. Guarneri has tried to reduce the trade deficit to some such figure as 2} milliard lire a year, which the receipts from invisible exports—that is, to an overwhelming extent, from tourist expenditure—would suffice to offset. In the last year by constriction of imports he has come close to bringing about such a reduction. But meanwhile tourist traffic also has been reduced to a minimum, except German tourist traffic, which is paid for not Lin free exchange but in credits to | clearing account. Drawing from Gold Reserves ' or Guarneri has revealed that in 1938 he had to draw £2,000,000 from the gold reserves of some £40,000,000 which the Bank of Italy still shows among its assets, and is still drawing. As imports for armament purposes cannot be curtailed he demanded "action in the sphere of civil life,” including apparently going slow on motoring, with its requirements of oil and rubber imports. (London bankers have noticed lately a conspicuous drawing on Italian accounts for payJ mint of rubber imports.) I A few days earlier the Finance Minister. Thaon di Revel, summed up the medal Budget deficits incurred by tt? Italian State from 1934 to 1938 at 42 milliard lire. That is. in those yerrs the Italian State incurred extraordinary expenditure equal to about

two annual Budgets of the previous average size. These were met by borrowing of the most variegated description

He thinks that Italy must now be ready to meet a normal Budget of 32 milliards, and in order to provide revenue for this permanently increased State expenditure he outlines a great t ax reform. Agricultural income tax is to be levied no more on “empirically” assessed values but on the real average income over a period. The million ana a quarter payers of agricultural income tax, the similar number of payers of professional income tax, and the 4,000,000 payers of income tax on buildings will have their assessments arrived at no longer by discussion with the fiscal authorities. but by technical methods in which the corporations will assist. Italian Governments have several times since the Union of Italy (1860) been in great financial straits and have managed to cope with them either by hard and unpopular taxation (as with the tax on flour milling in the seventies) or by changes in economic policy (as with the calling off of prohibitive duties against France in the nineties). Tightening Taxation The programme now being attempted comprises simultaneous curtailment of private and personal consumption and tightening up of taxation. For the State shows no sign of abating expenditure either on armaments or on other public equipment. The Minister for Transport has announced that Italy is to build 200.000 tons of commercial shipping yearly for 10 years (25 large ships are now in course of building). Whatever the Minister for Exchange Control may think, the Minister for Transport looks for a larger addition of new automobiles to the national stock in 1939 than in 1938 and a huge scheme of railway electrification to be accomplished by 1942. All this requires undiminished or expanded imports of industrial raw materials and capital goods, of which until Italy can sell goods more easily abroad. Germany will be the only ready provider. As to selling more goods elsewhere, Italian industry has had since January to meet a general 8 per cent, rise in wages, and the Minister for Finance, in his recent speech, agreed that the control which has prevented prices from following costs must be gradually relaxed. Other countries also are likely to have to raise their export prices, but perhaps less quickly than Italy must do.