Strong budget deficit (7.9, 17.4 and 15.8 billion respectively in the financial years 1919-20, 1920-21 and 1921-22), both for the gradual exhaustion of war taxes, for the inadequate increase in revenue of ordinary taxes and for the many tax evasions, both for the difficulty of containing public expenses and for the huge deficits of the industrial enterprises of the state, especially of the railways; gradually increasing public debt (from 79.4 at 30 June 1919 to 114.5 at 30 June 1922); circulation spoiled by inflation (20.5 billion notes at the end of October 1922) and money reduced to ¼ of its value against the pound sterling and to less than ¼ against the dollar and gold (change, as of October 31, 1922, respectively at 100.95, 445.36 and 445.18): this was the situation of Italian finances when the fascist government took power.
According to Harvardshoes, the situation was immediately dealt with decisively by Minister A. de ‘Stefani. First of all, a reorganization of taxes was required, both in order to restore the finances of the state and to facilitate the economic development of the nation, hampered above all by a heavy and poorly distributed tax burden. Having obtained full powers, the government then proceeded to issue a numerous series of decrees with the dual purpose of creating a new and rational tax system which, with the elasticity of its income, would ensure the possibility of dealing with the gradual decrease in extraordinary taxes and fill part of the deficit; and at the same time to achieve a fair distribution of the burdens among the various categories of taxpayers, without reducing the country’s productive capacity and indeed increasing its effectiveness by freeing the mechanisms of production and exchanges from constraints and by facilitating the formation of savings and the inflow of foreign and emigrant capital. The elimination of war and post-war tax superstructures, the reorganization of the three fundamental direct taxes of a real nature (on income from land, buildings and movable wealth) and their integration with a new progressive complementary tax of a personal nature, the quasi-general reduction of rates, the replacement of a new tax at a single rate for the multiple ones that hindered the exchange of wealth, the abolition of the mandatory nomination of securities, the exemption from the tax on mobile wealth of foreign capital, the abolition of inheritance tax in the family unit, the many reductions in customs duties and the severe measures adopted to avoid and repress tax evasion, are the essential elements of this reform which gave Italy a mild tax system with a very broad basis, highly elastic, and which, despite the abolition of extraordinary taxes and the reduction in tax rates, resulted in a significant increase in tax revenues (the revenue from direct taxes, taxes and indirect taxes on consumption increased from 10.5 billion in 1921-22 at 13.3 in 1924-25). At the same time a rigorous review of expenses was carried out, controls unified and strengthened, the financial administration reorganized and streamlined, freed the state from the management of some industrial services with the creation of autonomous companies.
9 billion and a large part of the burden deriving from the insurance policies for ex-combatants had also been redeemed). The rapid decisive intervention of the government and the severe discipline imposed on forward contracts, then served to maintain panic and speculation, but a few months later a new violent crisis compromised the fate of the lira and on 2 July the exchange rate with the dollar. it rose to 29.88 (while the maximum reached in the previous crisis was 25.13). This time, however, the crisis was mainly due to the game of international speculation; the achieved fiscal consolidation, the gradual decrease in floating debt.
The second exchange-rate crisis had a similar and even more pronounced character, which broke out in July 1926 (maximum reached by the dollar exchange rate on July 28: 31.60) and which also finds no justification in the economic and financial situation of the Italy; in fact, the 1925-26 financial year also closed with an actual surplus of about ½ billion and the government had in the meantime settled the war debts, proportioning them to the credits for reparations, to further increase its availability in gold for the defense of the exchange rate through the conclusion of the Morgan loan and other industrial loans, to unify banking circulation by concentrating the privilege of the issue in the Bank of Italy alone and to strictly control exchange operations and investments on the domestic market.
It was therefore necessary to definitively subtract the Italian currency from the dangerous influence of international speculation, which, oriented in a pessimistic sense, threatened to compromise the results already achieved in the laborious work of revaluing the lira, and above all to create a wave of confidence in Italy and abroad. capable of reversing the trend of the speculative movement. On 18 August 1926 in Pesaro the head of the Italian government then proclaimed that the state and the whole nation would from that day on in perfect agreement for an indefinite time and with all their strength played to the rise of the lira. A game that had every chance of succeeding, given that it was undertaken by the vast majority of lire holders, and which therefore also had to orientate the forecasts of foreign speculators in a favorable direction. In fact, from that day until June 25, 1927, in connection with the implementation of an effective paper deflation plan (reduction of the amount of the state debt to the issuing institution, increase in metal reserves, limitation of bank circulation on behalf of the trade, contraction of the quantity of government notes, and transformation of the minute circulation of the state from paper to metal) and of floating debt consolidation, the dollar rate in relation to the lira did nothing but fall, passing from 31.60 to 17 , 24.
