Currency

   The former Italian unit of currency was the lira (lire in the plural form). Its origins lie in the monetary reforms of Charlemagne, undertaken between 793 and 794. Twenty soldior 240 denari constituted a lira. By the 13th century, there were Lombard lire, Venetian lire, Genoese lire, Florentine lire, and others, the value of each determined by the precious-metal content of the coins. The first lire used throughout Italy were coined in the Regno Italico, which was established by Napoleon in 1806. The bimetallic lira of united Italy was introduced on 24 August 1862, and its value was established as 4.5 grams of silver or 0.293 grams of gold. At the same time, six banks were authorized to print paper currency. The Papal states (Latium, Emilia-Romagna, Marches, Umbria) did not begin to use the lira until 1866. In 1926, the Banca d’Italia was given a monopoly on the printing of paper currency. World War I, in Italy as elsewhere, brought wild inflation that ruined many bourgeois families, small landowners, and those living on rents. By 1920, the lira was valued at one-fifth of its 1914 level. The ruination of the old bourgeoisie was accompanied by the creation of “new rich,” black-marketeers, and arms manufacturers particularly. Exchange controls that had been established in 1918 by agreement with Great Britain, France, and the United States had run their oneyear course and duly expired; the result was the further collapse of the lira’s value on international markets. Whereas in 1914, $100 would purchase 518 lire, the same $100 bought 2,857 lire in 1920. Because Italy depended on imports of many foodstuffs, especially wheat, and industrial energy sources, such as coal and oil, the effect on the cost of living was devastating.

   Benito Mussolini, ever sensitive to matters of prestige, saw the falling lira as an affront to national honor. Ignoring the advice of those economic counselors who foresaw that an overvalued lira would have a deflationary effect, he apparently thought that what mattered was public enthusiasm, and he coined the slogan quota novanta, suggesting thereby that no rate of exchange below 90 lire to the British pound would be tolerated (in 1925, it had been near 145). In December 1927, the Duce decreed that the exchange rate with the pound sterling should be 92.46, which had the predictable effect of making Italian goods prohibitively expensive to foreign buyers.

   As an occupied country after World War II, Italy found its currency pegged to the U.S. dollar at a rate of $1 for 630 lire. Italy became a member of the International Monetary Fund (IMF) in 1960, and the exchange rate stabilized at 625 lire to the dollar until 1973, when the floating exchange rate was begun worldwide. The lira, suffering the effects of high domestic inflation, declined against the dollar and other European currencies throughout the 1970s. Membership in the European Monetary System (EMS) brought relative currency stability until September 1992, when the lira, buffeted by waves of speculative selling, crashed against the German mark and other European currencies. The lira remained Italy’s currency until January 1, 1999, when Italy qualified to use the euro. Lira notes were replaced by euro notes on 1 January 2002.

   See also Economy; European Integration.