ITALIAN DISTRESS

Te Awamutu Courier, Volume 56, Issue 4053, 27 May 1938, Page 3

ITALIAN DISTRESS

CHAINED TO GERMANY. PRESSURE OF ECONOMICS. VANISHED RESERVES. The complete acquiescence of Italy in the annexation of Austria by Germany has roused widespread speculation as to what exactly was Signor Mussolini’s role in this latest Nazi coup, said a writer in the “Yorkshire Post” on March 19. It is a long ;*ry from his dramatic concentration of Italian troops on the Brenner Pass in 1934 to his publicly expressed approval of the arrival on the other side of the same frontier of the German Army over the body of the State whose independence he had always shown himself anxious to uphold. The answer to this question holds far more than an academic interest, since it will be found to contain a number of pointers from which important conclusions as to the probable trend of Italy’s foreign policy can be deduced.

There can be little doubt that a bargain has been struck between the Fuhrer and the Duce, by which the Fuhrer was given a free hand in Central Europe in exchange for important guarantees of German support in the Mediterranean. At the same time, it would be a mistake to assume that Signor Mussolini gave way lightheartedly over the Austrian question. Whatever the terms of the agreement, Italy’s cession of her interests in Central Europe implies a serious weakening of her status. The reason for her acceptance of the role of junior partner to the Berlin-Rome Axis is not far to seek. Crushing Burdens. First and foremost in her economic position, which has suffered a steady deterioration for some time, and has latterly reached an alarmingly acute stage. This, together with the absence of large numbers of Italian troops in Abyssinia, Spain, and Libya placed the Duce in a position which made it impossible for him, for the time being at any rate, to risk a conflict, or even to create tension, with Germany. Whatever his real inclinations, his policy has been one of necessity based on very real economic distress.

In Abyssinia the war has cost Italy 12,000,000,000 lire in cash, besides the loss of foreign exchange assets and gold reserves amounting to at least 6,000,000,000 lire, and far from proving itself an immediate asset, Abyssinia has remained a crushing liability. Between January and September, 1937, the simple military occupation of the country—and the Italian hold on Abyssinia cannot yet fairly claim to amount to more than that—cost Italy an average of lire a month. This figure has grown monthly larger, until for February, 1938, it reached 85,000,000 lire. At home, Italy is in even greater financial and economic straits. To a country so naturally poor in raw materials, the policy of self-sufficiency on which she has embarked must at any time prove both costly and unproductive, even more so than is the case with Germany. Exports have never fully recovered from the loss of markets during the Abyssinian war, and Italy’s adverse balance of trade for 1937 was 5,600,000,000 lire. The full significance of the figure is brought home by the realisation that the total gold and foreign exchange reserves, including foreign assets, to-day stand at only 6,000,000,000 lire. Even alltowing for a sum of 2,500,000,000 lire for invisible assets, tourist trade, etc., a net loss in a single year of 4,000,000,000 lire (3,000,000,000 in gold and foreign exchange and 1,000,000,000 in consumption of raw material stocks) can only | mean that if things continue at the present rate Italy is perilously near he end of her reserves. With so much cause of concern at home, Italy cannot afford to look on with equanimity at the long-drawn struggle in Spain in which she is so deeply involved. Apart from the maintenance of between 50,000 and 60,000 troops in Spain at her own expense, she is supplying munitions (tanks, aeroplanes, artillery, and other war materials) to Franco on a huge scale. Nationalist Spain’s debt to Italy at the beginning of March amounted to 3,500,000,000 lire. In the event of Franco forcing a quick victory, which may now be regarded as probable, provided that there is no last-minute foreign assistance to the ■ Spanish Government, Italy may gain a firm footing in Spain. But even then it is unlikely that Franco will be able to pay off his debt to Mussolini in cash. Ho is. on the contrary, more likely to call on Italy for fresh credits to enable him to reconstruct and develop his potentially rich country, so that what may prove a sound long-term investment for Italy has turned out a sad disappointment in the matter of quick returns. The Time Factor. Unluckily for Italy, time is the vital factor. Her present foreign exchange

position is such that she cannot afford to wait.

From this, the obvious but all-im-pbrtant conclusion emerges that some immediate change or modification of policy is a categorical necessity. Somehow or other Italy must either be relieved or diverted, and effective relief can only be obtained by means of a radical revision of policy and intentions in more peaceful directions. Diversion, on the other hand, lies in continued co-operation with Germany in an expansionist policy—a co-opera-tion which, with German troops on the Brenner, Italy can no longer, on purely military grounds, afford to refuse.

Of the two possible courses, therefore, it seems likely that Signor Mussolini will elect that of throwing ir his lot with Germany, since in an.v case it is difficult to see how the complete volte-face which would be necessary to secure relief of economic pressure could be politically accomplished without an impossible rupture with the forces of Nazidom.

If he chooses this alternative of diversion, then Italy’s economic dilemma will obviously be rendered more acute than ever, so that she will be obliged to prepare herself, economically if not politically, for a day of reckoning which cannot by the nature of things be indefinitely postponed. Whether of not Italy will try to forestall this calamity by <an act of despair is a question which the course of events alone can answer.