To face the economic crisis it was first of all necessary to prevent the lira from being overwhelmed by the international monetary upheavals and for this reason an attempt was made to strengthen the gold reserves more and more so as to constitute only with them the normal coverage of circulation; indeed a policy already followed by the Bank of Italy since the end of 1927 and tending to evolve from the gold exchange standard regime towards the adoption of a monetary system closer to the pre-war gold monometallist regimes, in order to ensure the maximum guarantee of the gold reserve for the notes and other sight commitments and at the same time to be able to allocate all the foreign credits and foreign treasury bonds to the exclusive function of mass maneuvering. From December 31, 1927 to June 30, 1933, the ratio of gold in cash to total sight debts rose from 20.80 to 46.98% and that of gold in cash to the amount of banknotes in circulation from 25, 27 to 51.94%. On the other hand, the ratio of the total reserve to total commitments decreased in the same period from 55.47 to 49.2%, following the significant contraction that occurred in the equivalent reserves both to meet the needs of commercial and financial relations with foreign countries, and above all to withdraw the exuberant tickets from circulation. In this regard, it should be remembered that the largest part of the currencies owned by the Bank of Italy at the time of stabilization had been formed through the spending of notes, that the subsequent extinction of the state debt represented by bank notes had loaded the issuing institution also of the weight of the latter, and that, also given the diminished need for circulating mediums as a consequence of the economic depression, the bank had necessarily to provide for the proportion of circulation to its normal turnover and to the level of prices; the reduction of around 5 billion is therefore not due to a vigorous deflation policy but to a necessary adaptation to the new monetary situation. Always to defend the currency, assiduous supervision was exercised on the exchange and securities market and for the same purpose, as well as in the interests of export trade and production, every effort was made, with concrete results, to improve the trade balance. As a result of all this, the lira was very limitedly affected by the irregularity of the price that preceded and followed the sterling crisis and proved to be one of the most resistant currencies even in the recent fall of the dollar.
On the other hand, according to Healthinclude, it was necessary to support the various branches of production and commerce and increase the liquidity of credit institutions to enable them to amortize the consequences of the crisis without detrimental to savings and healthy businesses; and the activity carried out by the government in this field was also vast, both through the liquidation institute and, again, with the creation of the Italian securities institute, intended to implement a more complete separation of financial and banking activities, in in order to relieve the ordinary banks of the task of financing the industry and thus avoid the harmful interference between the bodies of production and credit, and, lastly, with that of the Institute for Industrial Reconstruction,
To mitigate the inevitable worsening of the budgetary situation, the government tried to limit, as far as possible, the drop in direct tax revenues without creating pressure that was not adequate to the real conditions of the taxpayers, and to neutralize it in part with the the tightening of some taxes and above all of some customs duties; and at the same time he added a rigorous economy in all the other chapters to the new indispensable expenses to favor productive activities and reduce unemployment. Nonetheless, the imbalance of the budget, which after 6 years of surplus had returned to manifest itself in 1930-31, was accentuated in 1931-32 and in 1932-33 which closed with an effective deficit of 3.9 and 4 respectively. 0 billion against 504 million in the previous year; therefore inevitable was the increase in the internal public debt which rose from 30 June 1930 to 30 June 1933 from 87.9 to 97.0. Particularly noteworthy is the issue of nine-year Treasury bills in May 1932, which in addition to allowing the renewal of approximately one billion pure nine-year bonds of imminent maturity, also yielded 3 billion in cash which were destined in equal parts to works public and industrial supplies, to decrease the budget deficit and to decrease the debt of the liquidation institute to the Bank of Italy to increase the liquidity of the bank’s assets. Having dealt with the decrease in actual revenues and higher expenses with the opening of loans must not, however, lead to pessimistic evaluations on the conduct of Italian public finances in the last two years. The government, in fact, which, even at the cost of serious sacrifices by the nation, has maintained the achieved balance of the budget for years, on the other hand could not fail to take into account the exceptional depression in which the country currently finds itself due to the crisis and the worsening of the situation that would derive from wanting to break even at any cost with further reductions in expenses or tax increases. It is therefore natural that on the rigid application of the sound principles of financial policy followed up to now, he believed it opportune to temporarily prevail an action aimed above all at the conservation and reinvigoration of the productive activities, certain that the recovery of the economic organism, both spontaneously and allowing a return to a stricter policy.
