The lira, currency control and the first Italian flight capital

From the war economy to quota 90

Italy's control of capital movements began in the First World War. According to the Bank of Italy's history of its own institution, the central bank financed the Treasury on a large scale during the war, the gold convertibility of the lira was abandoned and a State monopoly of foreign exchange was introduced.¹ After the war the lira lost much of its value. In July 1924 a pound sterling cost about 120 lire. By June 1926 it cost 153.68 lire, and the dollar had risen to 31.60 lire.² For an Italian saver, a deposit in Swiss francs in Lugano or Chiasso was in these years a straightforward hedge against inflation and devaluation. The border lay an hour from Milan, the language was the same and the banks of Lugano had Italian connections.

The Fascist government responded with a policy of revaluation. In a speech at Pesaro on 18 August 1926 Mussolini announced that the lira would be defended and brought back to a rate of about 90 lire to the pound, the so-called quota 90. The finance minister Giuseppe Volpi carried out the policy through credit restriction, wage cuts and a national loan, the Prestito del Littorio, which raised 3.15 billion lire.³ By the end of June 1927 the pound had fallen to 88.09 lire.⁴ The Bank of Italy, which had become the sole bank of issue in 1926, managed the return to gold. Its governor Bonaldo Stringher had doubts about the strong deflationary risks, but in 1927–1928 a new gold parity was fixed under a gold exchange standard.⁵ Quota 90 was a political rate. It made Italian exports expensive, cut wages by 10 to 20 per cent in October 1927 and burdened industry, but it also reduced for some years the incentive to hold savings abroad.

The crisis of the 1930s and the foreign exchange monopoly

The depression destroyed the stability of quota 90. The devaluation of the pound in September 1931 revalued the lira still further, the mixed banks had to be rescued and Italy's reserves of gold and foreign exchange declined. The Bank of Italy describes the mid-1930s as the period of the de facto end of the convertibility of the lira into gold.⁶ In December 1934 the government established a State monopoly of foreign exchange transactions, required residents to surrender foreign currency and declare foreign assets, and subjected all payments abroad to authorization.⁷ The administration of the system was entrusted to a new Sovrintendenza allo scambio delle valute, created in May 1935 under Felice Guarneri, raised to an under-secretariat of State at the end of that year and to a Ministry for Exchange and Currency in November 1937.⁸ The Istituto nazionale per i cambi con l'estero, whose functions passed to the Ufficio italiano dei cambi in 1945, executed the transactions.⁹ The Ethiopian war of 1935–1936 and the League sanctions intensified the pressure, and at the end of 1936 the lira was finally devalued.¹⁰

The criminal law followed the administrative controls. Italian currency legislation of the 1930s made the unauthorized export of capital, the failure to surrender foreign currency and the holding of undeclared assets abroad criminal offences punishable by fines proportionate to the amounts involved and by imprisonment.¹¹ It is sometimes claimed that Fascist Italy threatened capital flight with the death penalty. No such provision has been verified for this chapter. The claim probably transfers to Italy the German law against economic sabotage of 1 December 1936, which provided for the death penalty for German citizens who knowingly moved assets abroad or left them abroad in breach of the currency regulations.¹² Germany had already introduced a Reich flight tax (Reichsfluchtsteuer) by emergency decree of 8 December 1931, initially at 25 per cent of the assets of emigrants with more than 200,000 Reichsmarks.¹³ The comparison shows a common pattern of the period: States in currency crisis treated the export of private capital as an attack on the nation and punished it with escalating severity.

Notes

1. Banca d'Italia, "Dall'istituzione alla legge del 1936" (above): "Nel corso della prima guerra mondiale la Banca sovvenne largamente il Tesoro". ↩
2. Wikipedia (Italian), "Quota 90", https://it.wikipedia.org/wiki/Quota_90 (consulted as a last resort for the exchange rates). ↩
3. Wikipedia (Italian), "Quota 90" (above). ↩
4. Wikipedia (Italian), "Quota 90" (above). ↩
5. Banca d'Italia, "Dall'istituzione alla legge del 1936" (above), on Stringher's doubts ("i dubbi di Stringher sui forti rischi deflativi") and the new gold parity of 1927–1928; Banca d'Italia, "Storia", https://www.bancaditalia.it/chi-siamo/storia/index.html ("Nel 1926 divenne l'unico istituto autorizzato a emettere banconote"). ↩
6. Banca d'Italia, "Dall'istituzione alla legge del 1936" (above): "cessazione di fatto della convertibilità della lira in oro". ↩
7. Royal Decree-Law of 8 December 1934, no. 1942, on the foreign exchange monopoly. Banca d'Italia, "Dagli anni cinquanta a Maastricht", https://www.bancaditalia.it/chi-siamo/storia/anni-cinquanta/index.html, dates the beginning of the cycle of restrictive currency legislation to 1934. ↩
8. Luciano Zani, "Guarneri, Felice", in Dizionario Biografico degli Italiani, vol. 60 (Rome: Istituto della Enciclopedia Italiana, 2003), https://www.treccani.it/enciclopedia/felice-guarneri_(Dizionario-Biografico)/: Guarneri "istituì (maggio 1935) e diresse la sovraintendenza allo Scambio delle valute", which became the "Sottosegretariato per gli Scambi e per le Valute (29 dic. 1935)" and was "elevato al rango di ministero degli Scambi e delle Valute (novembre 1937)". ↩
9. Wikipedia (Italian), "Ufficio italiano dei cambi", https://it.wikipedia.org/wiki/Ufficio_italiano_dei_cambi, citing Legislative Decree of the Lieutenant of 17 May 1945, no. 331, by which the UIC absorbed the functions of the Istituto nazionale per i cambi con l'estero. ↩
10. Banca d'Italia, "Dall'istituzione alla legge del 1936" (above). ↩
11. Source as cited in the printed edition. ↩
12. Gesetz gegen Wirtschaftssabotage of 1 December 1936 (Reichsgesetzblatt 1936 I). Wikipedia (German), "Schweizer Bankgeheimnis", https://de.wikipedia.org/wiki/Schweizer_Bankgeheimnis (consulted as a last resort), states that the National Socialist regime threatened capital exports with penalties up to the death penalty but does not name the law. ↩
13. Wikipedia (English), "Reich Flight Tax", https://en.wikipedia.org/wiki/Reich_Flight_Tax (consulted as a last resort). ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of August 2025.