FINANCE FOR WAR

Timaru Herald, Volume CXL, Issue 20261, 9 November 1935, Page 21

FINANCE FOR WAR

THE METHODS OF ITALY CONVERSION SAVING A recent Italian Cabinet meeting here was occupied in finding ways and means of replenishing the exchequer and providing funds for the East African expedition, says the Rome correspondent of the “Daily Telegraph.” The official communique issued after the meeting made no reference to the international situation. It was solely concerned with financial matters. The communique announced the issue of a State loan "to meet the expense of the defence of the Colonies in East Africa.” The loan will bear interest at 5 per cent., and will be issued at 95. The total amount is not mentioned. Other new measures include; An increase, not yet specified, in direct taxation; a rise in motor and railway freights for merchandise; and exemption from income tax of all incomes under £66 a year. In addition war pensions will be stabilised under one fund. Call For Sacrifices "As a result of these provisions,” says the communique, “the State railways will certainly attain to a balanced Budget" in 1936 and 1937. “They will enable the State to strengthen revenue from the present financial year, so as to enable the Government to present balanced estimates for 1936-37. “Sacrifices which were too burdensome in the economic circumstances of the nation a year ago can to-day be asked of it in the present conditions of diminished unemployment, resumed industrial and commercial activity, and of the improved situation of agriculture, both in respect of the abundant crops and of the level of prices.” Banking circles are of the opinion that the issue of the new 5 per cent, loan will not close the financial measures to deal with budgetary difficulties. The increase of income-tax, as it is believed to have been assessed at to-day’s meeting, will produce about £10,000,000 during the present fiscal year. Further taxation of large fortunes must follow. There is a good deal of speculation as to the form it will take. The oneday mobilisation of civilians, for instance, may be followed up by a financial counterpart—that is, a restricted form of mobilisation of capital. Banking circles believe that the reconversion of the present 31 per cent, war and short-term loans, included in the present scheme, will alone bring in 9,000,000,000 lire (£150,000,000), to the Exchequer. The Method It will be done as follows: Holders of the 31 per cent, loans which were converted from 5 per cent, a couple of years ago are “invited” to participate in the new issue; but as they will enjoy an extra 11 per cent, interest, payable in advance, they must make cash payment of 15 lire per cent, when handing over their scrip. The redeemable value is 100 lire, but the market price is now 68 lire. Since 1930 Italy’s Budget deficits have increased at a rate which, if unchecked, must lead to bankruptcy, comments the "Daily Telegraph.” She has made herself independent of foreign wheat—at a big price—but must still import most of her raw materials. She has failed to raise credits in London, Paris, or New York; nobody wjll buy an Italian bond in London, even at the cheap, rates now ruling; and Italian bank-notes are selling at 25 per cent, below the standard price. Italy has imported in sufficient quantities for a short campaign; a protracted war could hardly fail to precipitate a first-class economic and financial crisis.