The Battle For Lire 1927 Flashcards
The years 1922-25
Represented a period of economic well being during which unemployment fell and there was a recovery in trade
By 1927, what had come to an end?
The period of economic stability, as the lira came under increasing pressure.
In 1927, what did the lira’s value plummet to?
150 to a £1
What was BM’s response?
Predictably defiant:
“I shall defend the Italian lira to my last breath”
Instead of devaluing the lira- which norms would have done- he revalues it
What does BM revalue the lira at?
90 to a £1
And restored the lira to the gold standard
Why did BM revalue the lira?
More for national prestige than sound economics
What were his aims?
- fix lira at 90 to a £1 like it had been in Oct 1922
- reduce inflation, which was harming sectors of the MC
- confirm image of F bringing stability to Italy
- Show Italians and the world that the lira, and hence Italy, was a mighty power
What were his actions?
- banks instituted tight controls on money supply
- economy deflated to drive up value of lira
- QUOTA 90 achieved in 1927 when lira was returned to GOLD STANDARD and exchange rate was fixed
Who benefited from the lower import prices?
Those industries who imported raw materials
What effect did it have on Italian exports?
It made hers far more expensive in the world markets and damaged her export trade.
It also reduced the nation’s considerable income from tourism
What was the overall effect?
It worsened the balance of payments situation and edged Italy closer to recession.
How did BM worsen the balance of payments?
Italian firms dependent on exports faced severe difficulties and BM retaliated by increasing tariffs on imports by 12%.
The countries affected simply retaliated, making the situation worse
How much did the total value of Italian exports fall by between 1925-38?
49%
How much did BM increase tariffs by?
12%
When was the government forced to devalue the lira?
1936- by 40%- impact of Abyssinia
