Italy Economy and Finance from 1954 to 1959 1

If 1953 can be considered the year of the return to a normal situation, after the overcoming of the decreasing phase of the Korean economy, it also represents the starting point for a further development of the Italian economy. The period from the end of 1953 to the Suez crisis was characterized by a continuous progress of economic activity, which took place in a climate of substantial monetary stability and free from cyclical variations of any magnitude. In the absence of disturbing factors coming from outside, the state economic policy was able to direct all its efforts towards the solution of the underlying problems of the country’s economy, constituted by the need to find employment for the considerable share of the unemployed and underemployed workforce and to eliminate the economic imbalance between the north and the south. Hence the efforts aimed at maximizing investments and creating suitable conditions for their rapid economic development in the depressed areas of the south and of the islands. Thus, further substantial interventions were carried out in favor of agriculture (allocations for land reclamation and transformation works, law for the development of small peasant property, extraordinary measures for Calabria), industry (provisions for the development of credit activity in the industrial field, with particular regard to medium and small enterprises, implementation of initiatives aimed at increasing productivity,

Continuing along the path already undertaken towards a rational coordination of all initiatives, towards the end of 1954, a ten-year scheme for the development of employment and income was formed, known as the Vanoni Plan, which had as its main objectives the maintenance, throughout the decade, of an annual rate of increase of the national income of 5% and the creation of 4 million new jobs, sufficient to absorb the existing unemployment and underemployment and the new generation of jobs. It was based on the assumption of a development of investments such as to increase their ratio with respect to national income from 20.5 to 25.4% at the end of the decade; result to be obtained through a policy of limiting wages and consumption and the contribution of foreign capital. Plan, even following the death of the proposing minister, which took place at the beginning of 1956, it did not subsequently have practical implementation through precise provisions of the law; however, it has exerted considerable influence on the economic policy orientations of the last five years.

In the years from 1954 to 1956, the gross national income recorded, in real terms, an average annual increase of 5.3%, mainly due to the rapid development of the industrial sector and tertiary activities. On the side of uses of income, investments showed, again in real terms, an average rate of increase of 10% per year, against an increase in consumption of less than 4%; consequently the ratio between investments and national income went from 20.5 to 22.6%. Between December 1953 and June 1956, industrial production increased by 21%, due in particular to the brilliant performance of the industries producing capital goods and auxiliary materials. In the consumer goods sector, on the other hand, due to the crisis in the textile industry, there was an increase of only 6%.

According to, the level of wholesale prices remained substantially unchanged over the two-year period 1954-55; in the first months of 1956 it showed a certain tendency to increase, in connection with the trend of prices on the international markets and with the lower supply of agricultural products in the interior caused by the frost, but in June the situation was normalized and the index showed an increase of just 1% compared to the 1953 average. By contrast, the indices of consumer prices and the cost of living showed a continuous upward trend, which was accentuated in the first months of 1956 as a result of the increases in food prices. By mid-1956 these indices had reached levels of 109 and 111 respectively, which was equal to 100 in 1953.

In the foreign exchange sector, our economic policy was constantly faithful to the principle of collaborating with all initiatives aimed at promoting the free circulation of goods, people, services and capital and at achieving the free convertibility of currencies. Hence Italy’s accession to the GATT, the European Payments Union, the international clubs in The Hague and Paris, the ECSC and, lastly, the European Economic Community, Euratom and the European Investment Bank; and also the measures of August 1954 and March 1956 which increased the liberalization of imports from the United States and Canada to 40%, the enactment in 1955 of new provisions intended to facilitate the inflow of foreign capital into Italy,

The intense internal economic development and the favorable evolution of the economic situation in the majority of foreign countries determined a significant increase in the value of trade in the three-year period in question. On the import side, the trend was ascending throughout the three-year period for industrial raw materials and equipment; food products instead marked a notable decrease in 1954 due to lower purchases of wheat and textiles recorded a minimum in 1955 in connection with the worsening of the crisis in the textile industry. On the export side, the greatest increases occurred in the mechanical and metallurgical sectors, as a result of both the modernization of equipment in Italy and the high foreign demand for capital goods. Overall, exports showed an increase of 42% in the three-year period, somewhat higher than that of imports (+ 31%), but not such as to reduce the trade deficit in the balance of payments in the years 1955 and 1956, which went from 636 million dollars in 1954 to 672 in 1955 and to 732 in 1956. In the sector of services and unilateral transfers, the development of the activity of our merchant navy reduced the deficit of the transport balance to a minimum, while the revenues for tourism, the remittances of emigrants and of our overseas workers and private donations were on an upward trend; as a result, the current account deficit gradually decreased, falling in 1956 to $ 226 million, a figure equal to about half of the 1953 deficit.

The surplus in the balance of payments thus returned to appear as a factor in increasing market liquidity. The other main liquidity factor, represented by the financing of the cash deficit of the treasury through the use of floating debt, instead marked, starting from the second quarter of 1955, a gradual decrease, in connection with the reduction of the deficit of the state budget and with the issue of multi-year treasury bills. The total volume of monetary holdings marked a slight decline in 1954, reached a new all-time high in 1955 and remained around that high in 1956; the main increases occurred in funding on the financial market and in the volume of monetary circulation. The reduction of the rate of interest on interest-bearing postal bills implemented in November 1953 and the significant increase in interest rates on term deposits set out in the interbank agreement of February 1954 resulted in a decrease in savings flowing to the postal administration in favor of that collected by credit companies and a transfer of bank deposits from free current accounts to restricted accounts. The lower cash requirements of the treasury, the wider possibilities for maneuvering allowed by the increase in term deposits and the increase in monetary availability enabled the banking sector to facilitate the development of production with adequate credit concessions.

Italy Economy and Finance from 1954 to 1959 1