A a Restricrted

'a A RESTRICrTED

Report No. EA-81 Public Disclosure Authorized

This report was prepared for use within the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized

CURRENT ECONOMIC POSITION AND PROSPECTS OF ITALY Public Disclosure Authorized

February 18, 1958 Public Disclosure Authorized

Department of Operations Europe, Africa and Australasia Conversion Rates of Italian Currency

U.S. $1 - Lit. 625

Lit. 1 = U.S. $9.0016 Lit. 1,000,000 U.S. $1,600 TABLE CF CONTENTS

CHARTS BASIC DATA SUMMliARY AND CONCLUSIONS

I. GENERAL

INTRODUCTION ...... 1 NATIONAL INCOME ...... 1 CONSUMPTION ...... *...... 1 INVETMFNT . .s ...... o EMPLOYMNT AND UNEMPLOYMENT...... 3

II. SPECIFIC ECONOMIC SECTCRS

AGRICULTURE ...... 4 MINING AND ENERGY ...... 5 INDUSTRY ...... o 7 CONSTRUCTION AND SERVICES ...... 7

III. MONETARY, FINANCIAL AND FISCAL POSITION

PRICES AND WAGES . . o .. . .o. . . 0 . . . .0. 0 . . 8 MONEY MARKET AND CAPITAL MARKET ...... oo 8 PUBLIC FINANCES...... 10

IV. EKTERNAL ACCOUNTS

FOREIGN TRADE ...... 11 BALANCE OF PAYMENTS ...... 11 OREDTWORTHINESS...... 13 STATISTICAL APPENDIX I TALY

SUPPLY AND USE OF RESOURCES - 1956 (PERCENT OF GROSS NATIONAL PRODUCT AT MARKET PRICES)

SUP Y :.--... .'-..-'"..':.'-..*...... *- . .. ..- . . USE. SUPPLY * SE

TRANSPORT AND PUBLIC CONSUMPTION OMMUNICATION 7%.o 8%

PUBLIC ADMINISTRATION

COMMERCE, SERVICES CREDIT, INSURANCE, RENTS

PRIVATE AGRICULTURE,> 70% oFORESTS AND TOTAL CONSUMPTIONz FISHERIES - GROSS 22% NATIONAL TOTAL z MINING 1% PRODUCT AVAltL- 100%/ ABILITIES 0:4% L CONSTRUCTIONWATl R2%- 114%~/ 6%

MANUFACTURING 32% z GROSS INVESTMENT 22 1/2%

IMPORTS OF -Jmø_ EXPORTS OF GOODS AND SERVICES DAND SERVCES

. .%.3% 1 ......

BRD ES ITALY

PRODUCTION INDEXES (1950= 100) 400 400 YEARLY

350- 350

300- 300

250- 250

200 - MINING 200 (irncluding notural gos) MANUFACTURTING

I50 - * 150 .50**4 ELECTRIC POWER

....----- ''AGRICULTURAL 100 100

50- 50 1938 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 (Est.) IBRD-ES 1323 ITALY

PRODUCTION INDEXES (1950=100) 250---, 250 CEMENT 200 200

150 150

100 100 YEARLY 50 --- _50 250 250 METALLURGICAL 200 - 200

150 - 150

oo 100 YEARLY 50 '_50 150 150 TEXTILES

100 __ _100 YEARLY 50 '50

200 200 MECHANICAL 150 150

100 100 e----YEARLY 50 -' 50 250 ---- , L 250

200 -- 200

150 - 150

100 -- 100 *-~ ~~Y EARLY 50 50 1938 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 (Est.) IBRD-ES 1324 ITALY

MONEY SUPPLY AND NATIONAL INCOME (INDEX, 1950: 100) 250 250 YEARLY

200 -200 MONEY SUPPLY (Est.)

150- 150

NATIONAL INCOME (At current prices) 10 100- 0

50- 50

0 0 1938 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957

WHOLESALE PRICES AND COST OF LIVING (INDEX, 1950 =100) 200---i7 200 YEARLY

150- i 150 COST OF LIVING

100 - 100 WHOLESALE PRICES (All goods)

50 50

1938 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 (Est.) IBRD- ES 1325 ITALY

GOVERNMENT APPROPRIATIONS BUDGET (BILLIONS OF LIRE)

0 1000 2000 3000 4000

1952-53 CURRENT EXPENDITURES INVESTMENTS EXPENDITURES REVENUES

REVENUES 1953-54ASSESSED EXPENDITURES REVENUES

1954-55 EXPENDITURES

REVENUES

1955-56 EXPENDITURES REVENUES

1956-57 (Est.) EXPENDITURES REVENUES

1957-58 (Est.) EXPENDITURES REVENUES

1958-59 EXPENDITURES REVENUES

IBRD-ES 1526 ITALY

TOTAL EXTERNAL TRADE (BILLIONS OF U.S. DOLLARS) 4 YEARLY TOTALS .300 r,, 3 IMPORTS (c.i.f.)

220

I .100

MONTHLY - Scale is 1/12 of annual scale 0 p . . . I I ..... I .,pj", ,j 0 VOLUME OF TRADE (FIXED WEIGHTS) (INDEX, 1950= 100) 300 300 YEARLY MONTHLY IMPORTS

100 100 0L EXTERNAL TRADE WITH U. S. (MILLIONS OF U.S.DOLLARS) 800 YE ARLY TOTALS6060 -MONTHLY - Scale is I/12 of '6 600_. annual scale IMPORTS 4 400 1

200

TRADE BALANCES WITH SELECTED AREAS (MILLIONS OF U.S. DOLLARS) +500 Y40 YEARLYSTERN EMISPERE (Excl.D EUROPE (Excl.SterlingVArea) 0(

-- 500,0.L..STERLING AREA /4

MONTHLY - Scale is 1/12 of onnual scale -80 _1000 f i l I". . ' I I. .

TERMS OF TRADE (FIXED WEIGHTS)

110(INDEX, 1950=100) . 110 YEARLY QUARTERLY

90 -90 80 - - - ' - ' 1 .. " " 80 '48 '50 '52 '54 '56 M J S D M J S D M J S D M J S D 1954 1955 1956 1957 1BRD-ES 1327 ITALY

BALANCE OF PAYMENTS ON CURRENT ACCOUNT (BILLIONS OF U.S. DOLLARS)

- .5 1.0 1.5 2.0 2.5 3.0

1952 EXPORTS(f.o.b.) NET INVISIBLES RECEIPTS PAYMENTS U.S. AID, 1953 IMPORTS (f.o.b.) OFFSHORE PROCUREMENT, OTHER MILITARY EXPENDITURES RECEIPTS PAYMENTS

1954 RECEIPTS PAYMENTS

1955 RECEIPTS PAYMENTS

1956 RECEIPTS PAYMENTS

1957 RECEIPTS PAYMENTS

OFFICIAL NET HOLDINGS OF GOLD AND FOREIGN EXCHANGE (BILLIONS OF U. S. DOLLARS) 1.5 l .5 END OF YEAR TOTAL 1.0 I O 1.0

NTFOREIGN ExC ANE 5.5

0~ 0 1950 1951 1952 1953 1954 1955 1956 1957 (Aug.)

IBRD-ES 1328 ITALY

CURRENT BALANCE OF PAYMENTS BY AREA (MILLIONS OF U.S. DOLLARS) t400 1400

1300 +300 U.S. AID, OFFSHORE PROCUREMENT, OTHER MILITARY EXPENDITURES -200 * 200

+100 +100

DOLLAR AREA 0 10

-100 -100 EPU AREA on -200 -200

ALL OTHER O -300 -- 300

-400 -400 1954 1955 1956

IBRO-ES 1329 ITALY

TOTAL EXTERNAL PUBLIC DEBT OUTSTANDING (MILLIONS OF U.S. DOLLARS) 1000 ,1000 AS OF JUNE 30,1957

750 750

500 .500

250 .. *..:...250 cD U. S.DOLLARS0 0 0 '48 '50 '52 '54 '56 '58 60 '62 '64 '66 '68 '70

INTEREST AND AMORTIZATION PAYMENTS (MILLIONS OF U.S. DOLLARS) 100 100 ... .TOTAL INTEREST.. 75. 75

50 50

2525 2 . .. AMORTIZATION5

0 0 '48 '50 '52 '54 '56 '58 '60 '62 '64 '66 '68 '70

TOTAL SERVICE AS PERCENT OF TOTAL CURRENT FOREIGN EXCHANGE EARNINGS 30%1 30%

DOLLAR INTEREST AND AMORTIZATION AS PERCENT OF DOLLAR EARNINGS 20% 20%

10% -/TOTAL10 INTEREST I0% AMORTIZATION

... TOTAL INTEREST SERVICE

0 I 1 .l l1 1i 1 I . I 1 0 '48 '50 '52 '54 '56 '58 '60 '62 '64 '66 '68 '70

IBRD-ES 1330 Italy

Basic Data

Population (1957): 48.4 million Area: 120,000 square miles

Gross National Product (1957 estimate): 14,700 billion Lit. ($23.5 billion equivalent)

Per CaDita Gross National Product (1957 estimate): 304,000 Lit. ($486 equivalent)

Gross Investment (1957 estimate): % of Gross National Product (1957) Financed by: Domestic Savings 21 L External Resources 1 23

Balance of Payments on Goods and Services: 1256 1957 Deficit (in million $ equivalent) 290 245 204 88 (est) Foreigh Trade (in million $ eguivalent): 1954 155 1956 1957 Exports (f.o.b.) 1,648 1,856 2,157 2,518 Imports (cif) 2J4_4 2.712 3,170 2555 Trade Balance - 758 - 856 -1,013 -1,037

Gold and Foreign Exchanae Assets (in million $ equivalent): End of December End of August 1956 195 Gold 338 422 Net Foreign exchange 768 835 Total 1,106 1,257

Public External Debt: Million $ equivalent December 31 195 June 30, 1957 Dollars 569 537 Swiss francs 95 105 Other 217 246 Total 881 888

Vholesale Prices: 1955 1956 1957 June December June December June December (1948=100) 98 98 99 99 96 97 (est.) Cost of Living: 1955 1956 1957 June December June December June December (1948=100) 123 124. 130 130 130 133 (est.) - 1 -

Summary and Conclusions

1. The real national income of Italy has continued to increase by an average of approximately 5% per annum during 1956 and 1957.

2. This growth in real income has made possible a continued improvement in consumption, an increase in domestic savings and investment which compares favorably with most other OEEC countries.

3. Although overpopulation and unemployment continue to be serious problems, the recent high levels of investment and economic activity are beginning to reduce chronic unemployment and give promise of eliminating it over the next decade.

4. Agricultural production suffered in 1956 and 1957 from bad weather but development activities have continued and Italy should be able to achieve an over-all balance on food account in her foreign trade during the Ten-Year Vanoni Plan period, ending 1964.

5. The rapid development of natural gas, the further exploitation of hydroelectric power resources, the production of oil in Sicily, the development of natural steam and the possibility of utilizing nuclear fuels may reduce dependence on imported sources of energy. If a petroleum law satisfactory to international oil companies is enacted, additional petroleum production in Italy may be reasonably expected.

6. Manufacturing industries, especially capital goods and durable consumers' goods industries, have greatly increased their output under the impetus of rising domestic investment and export demand. These factors have helped reduce unit costs and render Italy's manufacturing industries more competitive in domestic and foreign markets.

7. Construction and service industries have also been prosperous. Italy is experiencing a residential construction boom of unprecedented proportions. The tourist industry and particularly hotels and restaurants have been operating at capacity. The shipyards are booked for several years ahead and the merchant marine continues to grow. 8. Because of continued sound monetary policy and rising domestic savings, all this expansion has proceeded with relative price stability.

9. The continuing increase in domestic savings has acted aa a stimulant to the capital market and has allowed a substantial increase in long-term financing both for private industry and for public works. 10. Public finances have shown further improvement and revenues continue to exceed current expenditures. Financing of public investment has been carried out by largely non-inflationary means.

11. Exports have on the whole been developing favorably and earnings from invisibles have increased substantially. But because of heavy investment, imports have risen considerably more than exports. - ii -

12. With investment in excess of domestic savings, the balance of payments continues to show a deficit on current account. However, external resources in the form of U.S. aid and capital inflow have more than offset these deficits and resulted in continued increases in foreign exchange reserves.

13. If national income and savings continue to develop favorably and foreign exchange earnings increase as expected, the balance of payments position may become satisfactory within the Ten-Year Vanoni Plan period even at the investment levels which are presently proposed.

14. I' these expectations do not materialize, Italy would have to cut back investnent, which would mean that the steady reduction in unemployment would slow down. In view of the present smallness of external resources, this should be possible.

15. The debt service record is good and it is reasonable to expect it to continue to be so. The external debt service charges on Italy's foreign exchange earnings are relatively small, particularly in non-dollar currencies.

16. Because of all these considerations, Italy may be considered as a good risk for a further loan of about $75 million. I. GENERAL

Introduction

1. An appraisal of the creditworthiness of Italy was made by the Bank in the fall of 1956 in connection with negotiations for Loan 150 IT, (EA-64a) and in July 1957, the Bank prepared another report on "The Economy of Italy" (EA-71a). Both reports reached the conclusion that on the whole the Italian economy was developing favorably and at a satisfactory pace, and that Italy was creditworthy for additional external loans. The purpose of the present report is to trace subsequent developments.

National Income

2. The output of the Italian economy has continued to grow at a satisfactory rate. The increase in output for 1957 is provisionally estimated at 6% and compares favorably with the 7% in 1955 and 4%o in 1956. Thus the annual rate of growth during the first three years (1955-1957) of the Ten- Year (Vanoni) Development Plan for the Italian economy is slightly higher than the 5% annual rate of increase which was set as a target.

3. The performance during 1956 and 1957 is rather impressive because weather conditions were unfavorable and agricultural production fell below 1955. Consequently, the increased output stemmed entirely from industry, construction and services, as a consequence of recent substantial investments in all these sectors.

Consumption

4. The continuing increases in production have made possible higher levels of both consumption and investment. Private consumption rose by 4%o in 1956 and probably by approximately the same rate in 1957. These increases have reflected themselves in a growing demand for small auto- mobiles and motor scooters, electrical appliances, television sets, and other consumers' durable goods. Current public expenditures have also been rising, but less rapidly than national income. Thus in spite of rising private and public consumption, it has been possible to continue increasing the over-all level of investment.

Investment

5. A substantial part of the increased incomes is continuing to be saved and invested. Gross fixed investment, which accounted for about 21%0 of gross national income in 1955, rose above 22% in 1956 and preliminary indications are that it was even higher in 1957. This growth has been entirely contributed by private investment activity since the proportion of public investments during this period has declined from 34 to 31%. If this trend in savings and investment is maintained, it should make it possible to raise incomes in accordance with the targets set by the Vanoni Plan. (The special problem of raising incomes in Southern Italy is discussed in the accompanying report on the Cassa per il Mezzogiorno.) - 2 -

6. The volume of gross fixed investment was 6% higher in 1956 than in the preceding year, as is indicated by the following table: Gross Fixed Investment 1955 and 1956 (in billions of current Lit.)

Economic Sectors 1955 1956

Agriculture 372 373 Industry 847 940 Transport and communications 424 486 Construc. on 715 790 Public wor.s 248 240 Other fixed investment 144 163

Total fixed investment 2750 2992

Investments in industry, transportAion and communications have continued to increase substantially and in spite of warnings by monetary authorities, the volume of housing construction has continued to grow substantially. On the other hand, investment in agriculture and public works,both sus- ceptible to direct or indirect government intervention, actually declined in real terms. This was fully in line with the government's policy of stimulating private investment to the maximum and regulating public investment as necessary to reach the goals established under the Vanoni Plan.

7. The general pattern of the flow of savings into investment has recently changed significantly, as illustrated in the following table:

Financing of Investmentl/ 1955 and 1956

Amount in % of total Sources of Destination of billions of Lit, investment investment funds investment funds 1955 1956 1955 1956

Depreciation Private sector 944 1,025 32 33 reserves Self-financing, Private sector 643 664 22 21 direct savings and bank credits Capital market Private sector 418 516 14 17 Subtotal Private sector (2,005) (2,205) (68) (71) Capital market Public sector 577 459 20 15 Budget surplus Public sector 187 336 6 10 over current account Bank of Italy Public sector 101 - 21 4 - 1 and note issue Others Public sector 70 152 2 5 Subtotal Public sector (935) (926) (32) (29) Total investment 2,940 3,131 100 100

1/ For details see Appendix Table 3. Private enterprises continue to rely primarily on self-financing but the role of the capital market is growing. Less recourse by public authorities to the capital market left more savings to be tapped by private investors. This was made possible by doubling the budget surplus over current account expenditures.

Employment and Unemployment

8. While unemployment continues to be the major problem of the Italian economy, it is less of a problem than it was. The number of registered unemployed declined from 1.8 million in August 1955 to 1.6 million in August 1957. This was largely due to an increase in employment in industry and commerce by 295,000 in 1955 and 265,000 in 1956. The smaller increase in 1956 is explained by a slower expansion in construction activity. Since the net natural increase in the labor force during 1955 and 1956 is estimated at some 230,000 (net of emigration), the ranks of the unemployed and underemployed were reduced by some 330,000 persons in this period. Since these figures do not include agriculture, where some underemployed persons moved into the ranks of the fully employed, the real progress was even greater. That the government felt it possible to reduce public works employment from 314,000 in the summer of 1955 to 237,000 two years later is indicative of this progress. Although substantial, these achievements fall far short of the rate necessary to reach the 4 million new jobs goal of the Ten-Year Vanoni Plan. On the other hand, in the light of the experiences of the past three years this goal is looking more and more like an overestimate and it may turn out to be that the creation of fewer jobs than it envisaged will suffice.

9. The effects of these developments on employment have been particularly salutary in the depressed areas of the South. Not only has employment increased in the South but the growing demand for labor in the rest of the country has stimulated the movement of 1.3 million persons out of the depressed areas into other parts of the country. This internal migration, combined with net emigration into other countries in recent years, has greatly helped the employment situation in Southern Italy. Net emigration during the first eight months of 1957 was 244,000 -- an increase of nearly 50% over the preceding year. Indeed, the over-all demographic picture is improving somewhat, with the birth rate for the country as a whole having become stabilized at a level comparable to that in the rest of Western Europe. However, Southern Italy, with only about 37% of the population, continues to account for two-thirds of the annual population growth of the country. Within this framework large internal migration from Southern to Northern Italy helps to even out the population pressure and emigration continues to provide an outlet for it.

10. Although only partial data are available, it appears that the expansion in production in 1957 was due more to increased employment rather than to increased productivity, as was the case in most of the post-war period. Since a high proportion of the registered unemployed are unskilled or even completely lacdng in industrial experience, spot shortages of skilled labor have developed. A governmental committee has been established to study measures to cope with this situation. In the meantime, to facil- itate the placement of the unemployed the government sponsors vocational training programs, especially for the young, and in 1956 they enrolled -4 -

110,000 persons of whom 76,000 sucQessfully completed their training. Until recently only a few large private firms had such training schemes, but as skilled workers have become scarcer, interest in them has spread. The shortage of skilled workers or even of those with any training is particularly acute in the South and the revision of the Cassa law in July 1957 took cognizance of the problem. Although a good deal of effort and money will be reqqired to carry out the necessary vocational training schemes, they will make a real contribution toward an improvement of the employment situation. In the meantime the widespread emphasis on training requirements is itself evidence of the increased demand for manpower.

II. SPECIFIC ECCNOMIC SECTORS

Agriculture

11. As previously mentioned, agricultural production suffered from bad weather in 1956 and 1957, output in each year falling below that of 1955. Severe winter frosts caused considerable damage to crops in 1956, particularly in the South, and the output of cereals fell by some 10%, that of sugar beet by 25% and that of olives by as much as 28%. The general index of agricultural and forestry production in 1956 was, however, only 3% below the record level of 1955, due to increased livestock production, particularly in the North. Preliminary figures for 1957 indicate little, if any, improvement in total agricultural output, because of storms and floods in the Po Valley which severely damaged the wheat crop.

12. In spite of these setbacks due to natural forces, efforts to rea- lize the maximum potentialities of Italian agriculture have been continuing. Investments aiming ultimately at an increase of up to a fourth of the current level of agricultural output have been maintained and will have to continue if this goal is to be achieved. Irrigation and land reclamation on a large scale, particularly in the South, is progressing favorably. Further improvements in credit facilities and the strengthening of the Ministry of Agriculture Extension Service will be necessary if modern scientific farming is to be successfully promoted throughout the land. Moreover, considerable efforts will have to be devoted to improvement of marketing techniques. If these measures are implemented and the rather ambitious production goals are attained, Italy should be able to achieve an over-all external balance on food account, while at the same time improving domestic standards of food consumption.

13. The agricultural program contemplates elimination of imports of hard wheat by shifting a portion of domestic production from soft to hard wheat. The soft wheat crop normally exceeds domestic consumption and this has led in recent years to the accumulation of stocks by the government at support prices which have imposed a heavy burden on the Treasury. Due to two consecutive poor wheat crops in 1956 and 1957, these stocks have now been reduced. To increase theproduction of hard wheat, which is still below domestic requirement; the government increased the official price paid for hard wheat by 6% in 1957, at the same time lowering the price of soft wheat by 1o. The program also envisages increased imports of meat - 5 - and an expansion in exports of fruits, vegetables and other specialty foods. Its achievement will thus derend not only on the success of domestic efforts but also on foreign markets.

14. The other major problems now facing itaian agriculture relate to the implementation of the lend reform program and the contracts of share crorers and tenants. The land reform schere, while primarily introduced as a political and social measure ard apparently e>inently successful as such, gives every indication of costing more than was originally estimated. Moreover, some mfsgivings have arisen regarding the smallness of the allotted plots, and in some cases their size may have to be eventually increased in order to maximize output in line with the over-all goals of Italian agriculture. A rore serious problem politically but with strong economic overtones is the legal basis ("justa causa") on which a landlord may dispossess his tenant or share cropper. This provision has generated a great deal of con- troversy in the Italian Parlia-ent. The owners contend that they are virtu- ally precluded from ridding themselves of inefficient tenants, while the tenants' lobby has prevented the passage of legislation which would weaken their rights against being dispossessed. The issue is a perennial source of contention and if failure to resolve it should prevent the carrying out of the necessary improvements on rental farms, it .ay have adverse repercussions on the 3ong run prospects for raisinp the outDut of Italian agriculture.

15. Another problem is that of the support prices for wheat which impose a heavy burden uDon the Treasury. Th.-re does not seem to be any practical solution in sight for this problem, except that in the long run Italian authorities r:ay find it possible to permit a rise in the price of bread without serious political, social and economic repercussions.

Mining ard Energy

16. The subsoil resources of Italy are beginning to assume great impor- tence. Production of natural. gas reached 4.5 billion cubic meters in 1956, against 3.6 billion in 1955. A further increase of 10 to 15'0 took place in 1957, raising the total to about 5 billion cubic meters. This output is equivalent in energy content to between 7 and 7.5 million tons of coal or to about two-thirds of all the coal imported by Italy. Progress has also been made in petroleum production particularly in Sicily by Gulf-Italia. Production of crude oil increased from 567,000 tons in 1956 to Cbout 1 million tbns in 1957 and covered 10% of domestic consumption. Further substan tial increases in the production of natural gas and oil may reasonably be expected, with the output of crude oil increasing by 50 to 100% in 1958. It is generally believed that adoption of a. petroleum law more satisfactory to international oil companies would result in greatly stepped-up explorations on the mainland and there is a moverent for the enactment of such a law but the opposition to it rerrains strong and the outcome uncertain.

17. Fxcept in natural gas and petroleum, no significant increases in mining output have recently taken place. However, a very important dis- covery of potash was made in Sicily, which has already laid the basis of a. large - 6 - fertilizer industry there. While it is too early to pass final judgment preliminary indications are that the deposits may be among the richest in the world. This is the first major result of the geological survey launched in Sicily.

18. The demand for electric power has continued to keep pace with the expansion of the economy and the improving living standards. In response, the production of electric power grew from 38 billion kwh in 1955 to 40.6 billion kwh in 1956, and a similar increase took place during 1957. More than four-fifths of this power was supplied by Italy's hydro and geothermal resources with the remainder being furnished by thermal plants. To produce this thel-mal power the equivalent of about 7 million tons of coal was used. The total energy consumption of Italy in 1956 is given in the following table:

Equivalent in million tons of coal Percent from Energy source Amount (7,400 kg. calories ton) domestic sources

Hydroelectric 31.4 billion kwh 22.1 100 Geothermiq/ 1.8 " " 1.3 100 Petr eumY 11.3 million tons 15.3 9 Coals 12.0 12.0 6 Natural gas-/ 4.5 billion m3 6.6 100 57.3

Somewhat over half of the above energy consumption was supplied by domestic sources, thanks largely to hydro power and natural gas. On the other hand, some 10 million tons of petroleum and 11 million tons of coal had to be imported at a total cost of approximately $400 million.

19. If national income continues to grow by 5% annually it is reasonable to expect that the demand for electric energy will grow by 6 or 7% annually and some growth may also be expected in other energy requirements. While it is intended to increase the supply of hydro power by 50o by 1965, greater reliance will henceforth have tobe placed on thermal power because most of the economic hydro resources of Italy will soon have been developed, and because of the need for a more balanced power system. In this connection, the role of natural gas and of domestic petroleum will be crucial in saving foreign exchange. The construction of a nuclear power station in Italy will begin this year, but how much foreign exchange will be saved by this fuel is yet unknown. The over-all outlook for a greater reliance on domestic sources of energy is, however, none too hopeful at present and Italian interests have acquired oil leases, in the Middle East and in Africa.

1/ The equivalent of 7 million tons of coal was used to produce 7.4 billion kwh. of electric power. -7-

Industry

20. Industrial production continued to expand in 1956 and 1957. The rate of increase in industrial output of 8% in 1956 was only 1% lower than in 1955, mainly because of the poor showing in the last two months as a result of the closing of the Suez Canal. However, the upward trend was resumed and according to preliminary estimates total industrial output in 1957 was between 9 and 10% higher than in 1956. These increases were largely stimulated by a strong domestic demand for capital goods and by a rising external demand. In part the expansion also took place in response to a rise in domestic demand for durable consumers goods. Rising living standards also had a favorable effect on the textile, shoe and paper industries which registered gains of 12 to 15% during 1957. Output of the metallurgical and mechmabalindus- tries and in the chemical industries continued to grow at high rates. The output of steel is estimated at 6.8 million tons in 1957 as compared with 5.9 million tons in 1956. In the engineering industries the largest production gains were achieved in 1957 in railroad equipaent, tractors and calcu- lating machines. Ships under construction reached 401,000 tons at the end of 1956 and 560,000 tons by the middle of 1957. Only the oil refineries suffered a decline in activity during the first few months of 1957 because of the Suez crisis.

21. Because of heavy postwar investments, much of Italian industry has become competitive, judging by the recent trend of Italian industrial exports. On the assumptions of continued high levels of domestic demand and a steadily expanding international economy, the outlook for Italian industry is good.

Construction and Services

22. The construction and service industries have continued their expansion. Construction activity increased somewhat more slowly in 1956 than in the preceding year because of a reduction in public works. On the other hand, the housing boom has continued, with 1.5 million rooms completed in 1956 compared with 1.4 million in 1955. In 1957 the rate of increase was apparently even greater in spite of warnings against overexpansion by monetary authorities. Much of the increase in employment was taken up by this ntonstruction boom. There will be a continuing need for housing in Italy as population grows and if employment and incomes maintain their current rates of growth and if mortgage funds continue to be available, the outlook for the construction industry is favorable.

23. Most service industries have kept pace with the expansion of the economy, in some cases even exceeding it. Growth in production has had a favorable effect on domestic and foreign commerce, on banking and insurance, on transportation and travel. The railroads report increases in both passenger miles carried and in ton-miles of freight moved. Their operations from a technical and administrative standpoint are satisfactory and if the government did not saddle them with various extraneous expenses, such as prefer- ential freight and passenger rates, retention of uneconomic lines, etc., they would also be financially sound. Total traffic at Italian ports has also been rising rapidly as foreign trade keeps increasing. The Italian merchant - 8 -

marine is growing and has passed the 4.5 million gross registered tons. It makes an important contribution to the balance of payments. Passenger traffic at Italian airports and seaports has been rising as the number of tourists has continued to grow. Tourism is very important in the Italian balance of payments and there are signs that tourist capacity has been fully utilized. An expansion of hotel facilities is essential if Italy is to continue to receive its share of an expanding international tourist trade.

III. MONETARY, FINANCIAL AND FISCAL POSITION

Prices and Wages

24. Price stability has been maintained in the face of accelerated investment and greatly expanded demand. Wholesale prices were under slight pressure toward the end of 1956 following the Suez crisis, but they subse- quently receded and by June 1957 were below their level a year earlier. Food prices increased in 1956 as a result of frost damage to crops, but have since declined. Prices of semi-finished goods (particularly iron and steel products) and of raw materials (especially steel scrap and oil) increased toward the end of 1956 as a result of increased freight rates and import prices following the Suez crisis, but most of these increases have since been re- versed. Wholesale prices of finished goods have been weaker, particularly in 1957.

25. Unlike wholesale prices, the cost of living index rose by 4% in 1956 and by about 3% in 1957. The main factors behind the increase are a rise in food prices in early 1956 following the frost, and increases in controlled rents in January 1956 and January 1957.

26. On the whole wages have risen moderately, although the sharp increase in wage rates (including family allowances) in 1956 was in excess of increased productivity. These increases resulted from the sliding scale arrangement which linked wage rates to the cost of living. This system operated only upwards and in such manner that increases in living costs, even those of a seasonal or otherwise temporary nature, became built into the wage structure. This procedure has since been modified and a more flexible sliding scale arrangement was adopted under which wage rates will move in either direction in accordance with changes in the cost of living sustained for a three-month period. This elimination of seasonal increases in prices from affecting the sliding scale arrangement has already shown some salutary results: wages rose only moderately in 1957, except in agriculture where family allowences were raised.

27. The gap between increases in money supply and national income which has persisted in recent years, appears to have been narrowed in 1957.

Money Market and Capital Market

28. Both the money and capital markets have continued to expand. The demand for bank credit during 1956 was strong and loans amounting to Lit. 667 billion were made. To accomplish this, the banks had to reduce their liquidity and to resort to rediscounts with the Banca d'Italia. While sight deposits increased at a declining rate in 1957, savings deposits rose at a substantially higher rate and for the first time in postwar years almost reached the same level as sight deposits. This is a reflection of the public's growing confidence in the stability of the currency.

29. The total funds put at the disposal of the private sector, especially those provided through the banking system and the capital market, increased substantially in 1956, while funds made available to the public sector declined appreciably. The flow of savings during 1954-56 is ,iven in the table below:

The Flow of Savings (In billions of Lit.)

1954 1955 1956 Funds put at the disposal of the Treasury by: 1. Commercial and savings banks 153 163 117 2. Central Post Office Savings Fund 15 - 4 - 3. Social security and insurance institutions 19 4 11 4. Long-term credit institutions and capital market 142 154 71 5. Others 125 121 - 10 Subtotal 7 779

Funds put at the disposal of the private sector by: 1, Commercial and savings banks 488 575 670 2. Central Post Office Savings Fund 103 112 110 3. Social security and insurance institutions 81 101 101 4. Long-term credit institutions and capital market 266 278 378 5. Others 24 69 114 Subtotal 962 117 13-7 Total 1717 17 137

Sources of above funds: 1. Savings deposits and other bank accounts of similar character 416 432 504 2. Post Office savings 118 95 94 3. Social security and insurance institutions 100 105 112 4. Long-term credit institutions and capital market 409 432 4I 5. Current accounts in banks 237 358 263 6. Others 137 151 14o Total 117 177 157

While the sum total of savings placed at the disposal of the private and public sectors equals the total amount furnished by the several sources, the individual items do not necessarily correspond because of transactions among financial organizations and changes in their internal balance sheets.

30. Although considerable credit expansion took place in 1956 and 1957 it was apparently within manageable limits and in response to growing needs of the Italian economy. Even during the period following the Suez crisis, there is no indication of substantial accumulation of speculative inventories. Under these circunstances the monetary authorities found no need to change - 10 -

the discount rate or reserve requirements. They successfully relied on ad- monitions, their powers to veto bank loans exceeding certain sums and their control of capital market issues.

Public Finances

31. The state of public finances has shown some improvement and is reasonably good. The budget for the fiscal year 1957/58 provides for expenditures of Lit. 3,101 billion and revenues of Lit. 2,885 billion, resulting in a deficit of Lit. 216 billion which is well below those originally estimated for 1955/56 and 1956/57. The proposed investment expenditures are estimated at Lit. 504 billion, compared with Lit. 471 billion in 1956/57. The increase in total expenditures of 1% over the preceding year is mainly attributable to price rises. The increase of 4%o in estimated revenues over 1956/57 reflects expectations regarding the general level of economic activity, with half of the increase coming from the turnover and other business taxes.

32. Actual Treasury expenditures reached Lit. 2,867 billion in 1956, against revenues of Lit. 2,594 billion. The total cash deficits of the Treasury have moved as follows: 1954 1955 1956 7in billion Lit.

Deficit 553 552 315 Means of financing: Foreign aid 56 25 27 Borrowing 433 428 309 of which: from banks (244) (150) (118) from public (189) (278) (U91) Net increase in Treasury indebtedness to the Banca d'Italia 62 101 - 20 Issue of currency by Treasury 2 - 2 - 1 Total financing 553 552 315

Only half of the sharp drop in the cash deficit in 1956 was real, the rest being accounted for by redeposits of unspent balances by various government agencies. Nevertheless, this situation reduced the government's recourse to the market and it even repaid a small part of its indebtedness to the Banca d'Italia. This left more for the private sector.

33. The outlook for the public finances is reasonably good. Government revenue will continue to rise with national income since most taxes are directly related to business activity. Some small increase in direct taxes may also be expected as a result of better enforcement. The weight of evidence is that the general Italian tax structure is not likely to change greatly in the foreseeable future and that indirect taxes will continue to account for the bulk of the tax revenues. Although pressures to raise expenditures further will continue, the fiscal and monetary authorities have - 11 - demonstrated adequately their determination te3 contain public expenditures within limits set by the requirements 'f internal monetary stability.

34. The immcdiate problem is that of proper debt management. The internal public debt is now slightly over one-third of the gross national product and in 1959 and subsequent years a substantial amount of the long-term debt will mature -- Lit. 314 billion in 1959 and Lit. 116 billion in 1960. It hopes to achieve budget equilibrium by 1959/60 and it has already taken an important step in that direction with the 1957/58 budget.

IV. EXTERNAL ACCOUNTS

Foreign Trade

35. Recent trends in Italian foreign trade have been characterized by continued increases in imports and exports and a mounting trade deficit. With imports (f.o.b.) at $2.8 billion and exports at $2.1 billion, a trade deficit of approximately $700 million was incurred in 1956. The deficit for 1957 will be higher. The continued expansion in economic activity and growth in national income have affected imports and exports in all the main commodity groups -- foodstuffs, raw materials, semi-finished and finished goods. Of the increased imports in 1956 nearly two-thirds were raw materials, fuels and semi-finished products and one-sixth each foodstuffs and finished goods. On the export side, half of the increase was in finished goods, while the rest was divided about evenly between the other two groups. Although Italy?s traditional exports of textiles and foodstuffs did well in 1956, engineering products moved into first place and according to preliminary indications remained in this place in 1957. This is the result of industrialization and is most significant.

36. The regional distribution of trade indicates a heavy interdependence with the EPU area, which supplies nearly two-thirds of Italy's imports and takes roughly the same proportion of her exports. Next in importance is the dollar area, which furnishes about 20% of the imports and takes about 15% of her exports. Latin America accounts for less than 5% of Italian imports and exports. The remaining 10% of imports and 15% of exports are distributed over the rest of the world. Trade with Eastern Europe, particularly Yugo- slavia, has been expanding partly due to reparations by Italy and to imports of petroleum during the difficulties in the Middle East. Trade and trade deficits with each major region increased in 1956, as all areas contributed to increased imports. Increasing imports from the dollar area appear to be more the result of particular commodities in demand than of the liberaliza-. tion measures introduced in 1957, since the commodities showing the largest increase had been liberalized previously.

Balance of Payments

37. The balance of payments position has continued to improve in spite of the heavy excess of imports over exports. The trade deficit (f.o.b.) in 1956 of $706 million was offset by earnings from tourists, emigrants! remittances and by other invisible items to the extent of $502 million, thereby - 12 -

reducing the deficit on account of goods and services to $204 million. This figure was further reduced by $119 million as a result of such special receipts from the U.S. as offshore procurements, troop expenditures and other military payments. The remaining deficit of $85 million was more than offset by EFU credits, U.S. farm surpluses and inflow of capital. As a result of all these payments and receipts and of fluctuations in short-term claims and liabilities, net gold and foreign exchange holdings of Italy increased from $999 million to $1,109 million during 1956. According to preliminary indications, in 1957 the current account deficit dropped to $88 million. The special receipts from the U.S. and inflow of capital offset this deficit and made possibl a,lAl-" increase in foreign exchange-teeerves. Although part of this increase is believed to have been of a speculative nature, Italian reserves probably increased in 1957 by at least the same amount ($110 million) as in the preceding year.

38. The shape of things to come after 1957 can be described only in a hypothetical manner. If the volume of international trade continues to expand, the greatly increased Italian merchant marine may be expected to get a growing share of it and thereby convert Italy's transportation account deficit of $10 million during 1956 into a surplus of roughly $15 million annually. Similarly, if economic conditions do not deteriorate generally, Italy's net earnings from tourism may be expected to reach $250 million as against 8215 million in 1956. Emigrantst remittances, and earnings of Italian workers abroad, which reached $173 million in 1956, may also be expected to rise to $200 million as a result of continuing emigration, pro- viding high levels of production and employment persist in the countries of immigration. Thus "invisibles" could improve the balance of payments by about $85 to $90 million annually sometime within the Ten-Year Vanoni Plan period, ending 1964.

39. In 1956 Italy had a deficit of $47 million on food account. As a result of the present intensive efforts in agriculture, it is expected that this deficit will be eliminated in spite of a growing population and rising consumption. Increased domestic production of cereals, industrial crops, fruits and vegetables as well as of various kinds of specialty foods like cheeses, olive oil, etc., should decrease imports and increase exports. The net surplus of $226 million which Italy enjoyed in her exchange of manufactured products with the outside world during 1956 could be expanded. Recent heavy investments in the mechanical and chemical industries should produce favorable results. All told, the export-import balance on account of foodstuffs and manufactures could improve by about $150 million in the years to come.

40. Italyt s biggest foreign trade deficit is in raw materials and semi- manufactures. Although some internal shifts in this account might result in foreign exchange savings it would be unrealistic to put much reliance on them. In fact, increased exports of manufactures will require additional wool, iron ore, metals, etc., which may more than offset the import savings, and, on a net basis, some increase in the deficit for raw materials and semi-manufactures may result. - 13 -

41. The effect of all these changes might be an increase in net foreign exchange earnings of about $200 million in the following manner:

Invisibles $ $ 87 million Foodstuffs $ 47 " Manufactures / 103 " Raw materials - 37 " $ 200 million

Such a development in the balance of payments would practically eliminate the current account deficit of $204 million which existed in 1956. Indeed, the indicated improvement in invisibles only would suffice to eliminate the current accoLnt deficit of $88 million in 1957. It is, of course, quite possible that some of the increases may not materialize. On the other hand, the above projections make no allowances for possible further foreign exchange savings resulting from a more rapid exploitation of domestic natural gas resources, and successful petroleum exploration and development. Furthermore, no provision has been made in the above calculations for any special receipts in the form of offshore purchases, troop expenditures or other such inter- governmental transfers. These items could constitute an additional margin of safety.

42. Italy's membership in the European Common Market presents both an opportunity and a challenge. The status of agriculture and manpower, the two major fields of interest to Italy, have thus far not been clearly defined. If, however, Italy succeeds in securing a reasonable degree of liberalization in these fields, her balance of payments stands much to gain. Because of heavy postwar investments, much of Italian industry has apparently become competitive judging by the recent trend of Italian industrial exports and the enlargement of the market may bring about further reduction in costs. Although the leading Italian industrialists are lending their support to the common market, some industries are probably going to be subjected to great pressures and will have to make a number of readjustments as the tariff walls begin to be lowered. It is too early to prophesy what will be the effects of the common market on Italian industry, but there are no reasons for alarm and at this juncture at least there appear to be some very real oppor- tunities, including the active interest on the part of some foreign companies to locate or expand their operations in Italy with a view to penetrating the broader boundaries of the common market. Italy also expects to be a bene- ficiary of the European Investment Bank once it starts its operations. Should the European Common Market be associated with or absorbed by the Free Trade Area, the results on the Italian economy are not likely to be much different from those discussed above.

Creditworthiness

43. If, as previously suggested, national income, savings and foreign exchange earnings continue to grow satisfactorily as a result of recent and current high levels of investment, and if the international situation does not get worse, the balance of payments should remain satisfactory. Although with the continuing progress in liberalization and the dismantling of foreign - 14 - exchange controls, Italy is becoming more vulnerable to capital flight, it is significant that she has been steadily increasing her foreign exchange reserves by $100 to $200 million annually. Moreover, international confidence in her ability to manage her financial affairs has been growing as shown by the fact thet the "hot r.oney" in 1957 flowed into and not out of Italy.

44. The import surplus in 1956 was about li of total resources used by the Italian economy and around 3% of gross investment; in 1.957 it was less than half these proportions. If special receipts from the U.S. ceased and there were no inflow of capital, and no reduction in consumption could be effected, gross investment would have to be reduced from approximately 22% of G.N.P. to about 21%. This would still be a very satisfactory level by Western European standards, although it might slow down somewrhat the elimina- ti on of chronic unemployment. Thus, even under these unfavorable assumptions, the authorities should find it possible to bring the balance of payments into equilibrium and to service the debt even if the debt burden were soTewhat increased. The past record of Italy gives every reason to conclude that debt service will be given a high priority.

45. At June 30, 1957 the estimated external public debt of Italy amounted to a total of $F8M million equivalent, of which the U.S. dollar debt accounted for $537 million. In addition, Italy is subject to wer reparations claims equivalent to about $131 million. Against these claims there are, however, Italian assets and claims which may wholly or partially offset them. Annual service peyments on this debt (excluding reparations) average around $92 million in the 1958/60 period, drop to about $56 million in 1963 and decline steadily thereafter. Of these amounts, amortization payments account for between $45 million and $72 million in the earlier years, and between $25 million ard 39 million in the later ones. Total service payments of $92 million constitute less than 4% of Italy's global. foreign exchange-earnings at the 1956 rate. Consequently if she can re-establish equilibrium in her balance of payments on current account -- and the earlier analysis concluded that she should be able to do so -- the burden of servicing this debt would be relatively light.

46. The Italian debt service record is goof'. Th.are was no record of default on any publicly held external obligations unti.l June 1940 when Italy entered the war. Debt service payments on dollar bonds were resumed under the 'Tombardo Plan" which wert into effect in December 1947. Similar plans were adopted in 1948 for the sterlinr bonds and in 1951 for the Swiss franc bonds. To date all payments have been made promptly. Yiolds on Italian bonds at the end of January 1958 in 'Now York, london and Zurich were 6.33, 6.42 and 5.09 respectively.

47. The Italian economy is being made stronger and more flexible and should be able to carry more external debt. A loan to Italy of about $75 million would not increase service payments beyond 45 of present foreign exchange earnings. Given Italy's sound record of internal monetary management and external debt service, such a loan would carry with it a. good pros- pect of repayrent. - 15 -

48. Italyts foreign exchange earnings both from exports of goods and from invisibles in European currencies are almost three times as large as its dollar earnings. On the other hand, three-fifths of her present debt is in dollars. For these reasons it may be easier for her in the long run to service non-dollar debt than dollar debt. STATISTICAL APPENDIX

LIST OF TABLES

1. External Public Debt Outstanding June 30, 1957 With Major Reported Additions July 1-October 31, 1957 2. National Income and Expenditures 3. Fin,ncing of Investment 4. Agricultural Production 5. Industrial Production 6. Prices and Wages 7. Net Investment in Shares and Bonds of Joint-Stock Companies 8. Total Recourse of the Several Economic Sectors to the Banks, Special Financial Institutions and the Capital Market 9. Monetary Survey 10. Liquidity of Banking System 11. Government "Appropriations" Budget 12. Foreign Trade 13. Commodity Distribution of Exports 14. Commodity Distribution of Imports 15. Regional Distribution of Trade 16. Percentage of Total Imports of Certain Staple Commodities Supplied by EPU Countries 17. Imports from U.S. and Canada 18. Exports to U.S.:and Canada 19. Goods and Services Transactions with EFU Area 20. Goods and Services Transactions with Convertible Currency Areas 21. Balance of Payments 22. EPU Position 23. Official Gold and Foreign Exchange Reserves Table A-la: ITALY - EXTERNAL PUBLIC DEBT OUTSTANDING JUNE 30, 1957 !ITH MAJOR REPORTED ADDITIONS JULY 1 - OCT. 31, 1957 National,Government Guaranteed, and 1stituto Mobiliare Italiano Guaranteed Debt

SUkIIARY

(Amounts expressed in thousands of U.S. dollar equivalents) Page 1 Debt outstanding Major reported additions Item June 30, 1957 July 1 - Oct. 31, 1957 Amount / Amount TOTAL EXTERNAL PUBLIC DEBT 888,392 100.00 5,000 100.00

Disbursed and still outstanding 743,181 83.65 Undisbursed 145,211 16.35

U.S. DOLLARS 536,693 60.41 5,000 100.00 Disbursed and still outstanding 421,482 47.44 Undisbursed 115,211 12.97 Publicly-issued bonds 129,299 14.55 Privately-placed debt 8,571 0.97 Disbursed and still outstanding 6,749 0.76 Undisbursed 1,822 0.21 Loans held by IBRD 124,573 14.02 Disbursed and still outstanding 41,048 4.62 Undisbursed 83,525 9.40 U.S. government loans 274,250 30.87 5,000 100.00 Export-Import Bank 6o9,579 6.82 5,000 100.00 Disbursed and still outstanding 30,715 3.46 Undisbursed 29,864 3.36 Other U.S. government loans MI1)?4-

EPU UNITS OF ACCOUNT 157,675 17 Table A-la: ITALY - EXTERNAL PUBLIC DEBT OUTSTANDING JUNE 30, 1957 WITH MAJOR REPORTED ADDITIONS JULY 1-OCT.31,1957 (CONT.)

National, Government Guaranteed, and Istituto Mobiliare Italiano Guaranteed Debt

SUMMRARY (Amounts expressed in thousands of U.S. dollar equivalents) Page 2 Debt outstanding !ajor Reported Additions Item June 30, 1957 July 1 - Oct. 31, 1957 Amount Amount EXTERNAL PUBLIC DEBT (CONT.) SWISS FRANCS 104,954 11.81 Fublicly-issued bonds 16,4)47 1.85 Privately-placed debt 15,638 1.76 Loan from BIS 11,670 1.31 Loan from IBRD 14,519 1.64 Government loan 46,680 5.25

BELGIAN FRANCS (IBRD loans) 1,035 0.12

ARGENTINE PESOS (Government loan) 12,802 1.45

FRENCH FRANCS 32,826 _3.69 Privately-placed debt 28,571 Loan from IBRD 4,255 NETHLRLANDS GUILDERS (IBRD loan) 10,158 1.14

POUNDS STERLING (Publicly-issued bonds) 1,165 _0.1

DANISH KRONER (IBRD loan) 271 0.03

NORVEGIAN KRONER (IBRD loan) 813 0.09

DEBT PAYABLE IN U.S. DOLLARS OR ITALIAN LIRE 30,000 3.38

U. S. government loan (all undisbursed) 30,000 3.38 Table A-lb: ITALY - EXTERNAL _rUBLIC DEBT OUTbTANDING JUNE 30, 1957 WITH MAJOR REPORTED ADDITIONS JULY 1 - OCTOBER 31, 1957

National, Government Guaranteed, and I stituto iobiliare Italiano Guaranteed Debt (In thousands)

Page 1 Debt outstanding Major reported additions 30, 1957 July 1-October 31,1957 Item ItmJune In currency In U.S. dollar In currency In U.S. dollar of payment equivalents of payment equivalents TOTAL 888,392 / 5,00

U.S. DOLLAR DEBT $ 536,693 536,693 5,O00 Publicly-issued bonds $ 129,299 129,299 $39,651,900 Rep. of Italy 1% - 3%, 1947-1977 /2 - assented $ 32,020 32,020 - non-assented $ 1,061 1,061 $37,243,200 Ital, Credit Consortium for Public Vks. 1% - 3%, 1947-1977 A2 - assented $ 31,400 31,400 - non-assented $ 1,044 1,044 $1,921,000 Ital. Credit Consortium for Public Wks. 2nd Series 1%-3%, 1947-1977 2 $ 1,811 1,811 $55,076,600 Ital. Public Utility Credit Inst. 1 -3%, 1947-1977 /2 - assented $ 46,680 46,680 - non-assented $ 1,135 1,135 $18,000,000 Ital. Public Utility credit Inst. Special Series Lv-3), 1947-1970 / $ 14,148 14,148

Privately-placed debt $ 8,571 8,571 $1,180,125 participation at 31 for 1954-1959 in Export-Import Bank loan to Instituto iobiliare Italiano /4 $ 471 471 $5,000,000 participation at 3t% for 1958-1960 in $68,400,000 IBRD loan to Cassa per Il ih-ezzogiorno 4, 1955-1975 /4 5,000 at end of table. offootnotes ADDITIONS Table A-lb: ITALY - EXTLRNAL PUBLIC DEBT OUT"DTANDING JUNE 30, 1957 ..ITH MiAJOR REPORTED JULY 1 - OCTOBER 31, 1957 (CoNT.)

National, Government Guaranteed, and Istituto Mobiliare Italiano Guaranteed Debt (In thousands)

Page 2 Debt outstanding Major reported additions 30, 1957 July 1-October 31,1957 ItemJune Item In currency In U.S. dollar In currency In U.S. dollar of payment equivalents of payment equivalents U.S. DOLLAR DEBT (CONT.) Privately-placed debt (Cont.) Portion sold at 34% for 1961 without recourse of $68,400,000 IBRD loan to Cassa per Il iiezzorgiorno 4V, 1955-1975 /4 $ 1,000 5 1,000 Portion sold at 31 for 1956-1958 without recourse of $10,000,000 IBRD loan to Cassa per 11 Mezzogiorno 41, 1951-1976 L $ 100]L 100 $1,000,000 participation at 4-;, for 1956-1959 in $74,628,000 IBRD loan to Cassa per Il Mezzogiorno 5%, 1956-1976 /4 $ 1,000 L7 1,000 $1,000,000 participation in $10,000,000 Export-Import Bank loan to FIAT S.p.A. 5-L, 1956-1963 /8 $ 1,000 L2 1,000

Loans held by IBRD $ 124,573 124,573 Portion of $10,000,000 loan to Cassa per Il Mezzogiorno 4-1, 1951-1976 L $ 9,595 L 9,595 $10,000,000 loan to Cassa per I Mezzogiorno 5%, 1953-1978 4 $ 10,000 10,000 Portion of $68,400,000 loan to Cassa per Il Mezzogiorno 4e/, 1955-1975 4 $ 43,115 L 43,115 $74,628,000 loan to Cassa per I1 iezzogiorno 5%, 1956-1976 /4 $ 61,863 /Z 61,863 See footnotes at the end of table. Table A-lb: ITALY - EXTERN,L PUBLIC DEBT OUTST,NDING JUNE 30, 1957 'ITH MAJOR REPORTED ADDITIONS

JULY 1 - OCTOBER 31, 1957 (cONT.)

National, Government Guaranteed, and Istituto Mobiliare Italiano Guaranteed Debt (in thousands) Page 3 Debt outstanding Major reported additions Item June 30, 1957 July 1-October 31,1957 In currency In U.S. dollar In currency In U.S. dollar of payment equivalents of payment equivalents U.S. DOLLAR DEBT (CONT.)

U.S. government loans 274,250 5,000

Export-Import Bank loans $ .00.5? .6017?y $104,950,134 loan to IMI 31, 1947/52-1959 4 $ 17,524 17,524 $ 20,000,000 loan to IFIl 4 5/8jZ-4-,1955-l966 /4 $ 20,000 10 20,000 $ 1,500,000 loan to I!,-I 5- , 1956-1966 $ 1,500 /11 1,500 $ 6,355,000 loan to Aerolinee Ital.Internaz 51, 1955-1960 /8 $ 6,355 il 6,355 $ 6,200,000 loan to Linee Aeree Ital. S.p.A. 1956 /8 $ 6,200 /11 6,200 Portion of $10,000,000 loan to FIAT S.p.A. 52i, 1956-1963 /8 $ 9,000 /12 9,000 $ 5 ,000,000 loan to FIAT S.p.A. 51%, 7/23/1957- 1964 j8 5,000 5,000

Other U.S. government loans 216 $73,000,000 ERF loan 212A, 1949-1983 $ 71,039 71,039 $22,600 ,000oo S loan 2 /, 1952-1987 $ 22,600 22,600 $65,222 ,110 MA loan 32b, 1>42-1965 $ 21,769 21,769 $124,432,050 SF (Bonner-Corbino) 2 3/8a, 1946-1975/13 $ 86,123 86,123 $18,000, 000 SP (Del Vecchio) 2 3/8%, 1947-1976 /13 $ 12,140 12,140

DEBT IN 7PU UNITS OF ACCOUNT u/a157,675 157,675

u/a 267,900,000 Consolidated debt u/al51,583 151,583 Credit from EPU u/a 6,092 6,092- See footnotes at the end of tablte. Table A-1b: ITkLY - EXTERNAL PUBLIC DEBT OUTSTANDING JUNE 30, 1957 WITH MAJOR REFORTED ADDITIONS

JULY 1 - OCTOBER 31, 1957 (CONT.)

National, Government Guaranteed, and Istituto Mobiliare Italiano Guaranteed Debt

(In thousands)

Page 4 Debt outstanding Major reported additions Item June 30, 1957 July 1-October 31,195? In currency In U.S. dollar In currency In U.S. dollar of payment equivalents of payment equivalents SWISS FRANC DEBT SwF 449,772 104,954 Publicly-issued bonds SwF 70,470 16,447 SwF 22,682,200 Ital.Public Utility Institute 11-3, 1947-1977 /14 - assented SwF 20,374 4,755 - non-assented SwF 96 22 SwF 50,000,000 Istituto Mobiliare Italiano ONo, 1955-1971 SwF 50,000 11,670 Privately-placed debt SwF 100,000,000 Swiss Banks loan to Mediocredito 3-49, 1954-1959 fly5 SwF 67,000 15,638

Loan from BIS SwF 50,000,000 loan to Istituto Mobiliare Ital. 4%, 1955-1960 SwF 50,000 11,670 Loan held by IBRD SwF 62,302 14,519 Portion of $68,400,000 loan to Cassa per I1 Mezzogiorno 4 3/4%, 1955-1975 /4 SwF 23,392 12 5,453 Portion of $74,628,000 loon to Cassa per Il Eezzogiorno 5%, 1956-1976 swF 38,910 12 9,066

Government loan SwF 200,000,000 Swiss Natl. Rys. loan to Italian State Railways 3 3/4-4 3/4z, 1955-1981/4/16 SwF 200,000 46,680

See footnotes at the end of table. Table A-lb: ITALY - EXTERNAL PUBLIC DEBT OUTSTANLING JUNE 30, 1957 7-ITH MAJOR REPORTED ADDITIONS JULY 1 - OCTOBER 31, 1957 (cONT.) National, Government Guaranteed, and Istituto Mobiliare Italiano Guaranteed Debt (In thousands)

Page 5 Debt outstanding Najor reported additions Item June 30, 1957 July 1-October 31,1957 In currency In U.S. dollar In currency In U.S. dollar of payment equivalents of payment equivalents BELGIAN FRANC DEBT BF 51,728 1,035 Portion of $68,400,000 IBRD loan to Cassa per II Mezzogiorno 4 3, 1955-1975 L BF 16,151 L 323 Portion of $74,628,000 IBRD loan to Cassa per Il Mezzogiorno 5%, 1956-1976 L4 BF 35.577 /Z 712 AhGENTINE PESO DEBT MA$N 230,455 12,802 M$N 316,860,600 Argentine Govt. loan to Italy 3Z , 1947-1972 M$N 230,455 12,802 FRENCH FRANC DEBT BF 13,487,627 32,826 Privately-placed debt F12,000,000,000 line of credit from Banque Francaise due Commerce Exterieur to Cassa per Il Mezzogiorno /17 5%, due in 5 years F12,000,000 28,571 Loan held by IBRD Portion of $68,400,000 loan to Cassa per I1 Mezzogiorno 443, 1955-1975 /4 F 1,487,627 f/ 4,255

NETHERLANDS GUILDER DEBT f. 38,602 10,158 Portion of $68,400,000 IBRD loan to Cassa per Il Mezzogiorno 4 , 1955-1975 L4 f. 34,136 15 8,983

Portion of $74,628,000 IBRD loan to Cassa per Il Mezzogiorno 5%, 1956-1976 /4 f. 4,466 /7 1,175

See footnotes at the end of table. Table A-lb: ITALY - EXTERNAL PUBLIC DEBT OUTSTANDING JUNE 30, 1957 WITH MAJOR REPORTED ADDITIONS

JULY 1 - OCTOBER 31, 1957 (CoNT.) National, Government Guaranteed, and Istituto Mobiliare Italiano Guaranteed Debt

(In thousands)

Page 6 Debt outstanding Major reported additions Item June 30, 1957 July 1-October 31,1957 In currency In U.S. dollar In currency In U.S. dollar of payment equivalents of payment equivalents

FOUND STERLING DEBT

Publicly-issued bonds &62,460 Rep. of Italy Maremmana Ry. loan of 1862, 1;-3;, 1947-1977 118 416 1,165

DAN IH KRONE DEBT Portion of $68,400,000 IBRD loan to Cassa per Il Mezzogiorno 4-z, 1955-1975 /4 DKr 1,869 /5 271

NORWEGIAN KRONE DEBT

Portion of $74,628,000 IBRD loan to Cassa per Il Mezzogiorno 5%, 1946-1976 /4 NKr 5,807 L 813

DEBT PAYABLE IN U.S. DOLLARS OR ITALIAN LIRE

U.S. government loan $30,000,000 ICA loan to Italy 3, or 45, 1957-1998/19 $ 30,000 /11 30,000

See footnotes at the end of table. Table A-lb: ITALY - EXTERNAL FUBLIC DEBT OUTSTANDING JUNE 30, 1957 WITH .iAJOR REPORTED ADDITIONS

JULY 1 - CCTOBER 31, 1957 (cONT.)

Page ?. Exchange rates: The following exchange rates have been used:

Par values: E 1 = $2.80 The dollar equivalents shown for IBRD loans are expressed at the book values on IBRD records.

L Does not include the following:

a. Italy's obligation on the Austrian Guaranteed Conversion Loan 1934-1959. Italy guarantees the principal and interest up to 201;o. This loan is payable in several currencies. Payment of interest and sinking fund by the Austrian Government was suspended in 1939. The Italian Government, as one of the guarantors, advanced its share of the principal and interest beginning in 1948. Under an agreement concluded in December 1952, Austria resumed service of this loan. b. Italy's obligation on World War II reparations as follows:

(In U.S. dollar equivalents) Original Creditor Debt outstanding amount country June 30, 1957 Total 130,700,000 100,000,000 U.S.S.R. 100,000,000 125,000,000 Yugoslavia 10,000,000 25,000,000 Ethiopia 15,700,000 5,000,000 Albania 5,000,000

The following information has been received in regard to these debts:

1) U.S.S.R. - In December 1948 the two governments agreed to subtract from this debt the value of Italian properties in Hungary, Bulgaria and Rumania. The Italian Government believes the value of these properties to be at least equal to the amount of the debt. Any balance is to be paid in goods. A joint Italian- Soviet Commission was to assess the value of the properties but no decision has yet been reached.

2) Yugoslavia - An agreement of December 1950 provided for an initial payment equivalent to $30,000,000. A part of this (the equivalent of Lit 10,000,000,000) was to be withheld by the Italian Government on account of Italian properties nationalized by Yugoslavia. Under the agreement reached in 1955, this obligation was settled at the equivalent of $30,000,000. The debt is to be paid in deliveries of goods and investment credits equivalent to $10,000,000 each year from 1955 through 1957. Table P-lb: ITALY - EXTENAL PUBLIC DEBT OUTT.ANLINiG JUNE 30, 1957 .ITH iAJOR REPORTED ALLITIONS

JULY 1 - OCTOBER 31, 1957 (CONT.)

Page 8 - (Cont.) b. - (Cont.) 3) Ethiopia - According to The New York Times of March 6, 1956, Italy and Ethiopia have agreed to settle this obligation for the equivalent of $16,300,000. Italy is to build a hydroelectric power station in Ethiopia and to provide additional reparations in the form of equipment and installations.

4) Albania - According to Economic News from Italy dated July 15, 1955, the debt to Albania has been settled for the equivalent of $2,600,000, to be paid by delivery to Albania of Italian industrial products. The difference (equivalent to $2,400,000) from the original amount has been credited against Italian property located in Ilbania which -.1bania failed to return to the proper owners. The Italian government reports indicate, however, that this item has not been settled.

2 Service on Italian bonds was paid without interruption until 1940 when payments were suspended because of the war. In December 1947 a debt adjustment plan was put into operation. This plan (the Lombardo Plan) provided for the issuance of four series of bonds:

a. $39,651,900 Republic of Italy bonds to holders of Kingdom of Italy 7% bonds due 1951.

b. $37,243,200 Credit Consortium for Public Works bonds to holders of bonds of the Credit Consortium, the cities of Rome and Milan, and the Mortgage Bank of the Venetian Provinces.

d. $55,076,660 Public Utility Credit Institute bonds to holders of twelve issues of public utility and industrial corporation bonds not formerly guaranteed by the Republic of Italy.

d. $1,921,000 Credit Consortium for Public Vjorks bonds to International General Electric Company.

The new bonds of the Credit Consortium for Public Works and the Public Utility Credit Institute are guaranteed by the Republic. Each bondholder received a principal amount of new bonds equivalent to the face amount of his old bond plus unpaid interest fiom June 10, 1940 to January 1, 1947. Tnis unpaid interest amounted in most cases to between $400 and $500 per $1,000 bond. The new bonds are dated January 1, 1947 and mature on January 1, 1977. Interest is payable at the rate of 1p' per annum from January 1, 1947 to January 1, 1950, at 2% from January 1, 1950 to January 1, 1952, and at 3% thereafter. The bonds are to be retired by a cumulative sinking fund of 1% per annum of the total bonds issued in the years 1952 to 1957 inclusive, and 2% per annum thereaftei. Table A-lb: ITALY - EXTERNAL PUBLIC DEBT OUTSTANDING JUNE 30, 1957 WITH MAJOR REPORTED ADDITIONS JULY 1 - OCTOBER 31, 1957 (CONT.)

Page 9 Power ecurities CorporationCInternational (a United :tates company) Ras tne holder of a group of bonds of Italian companies, amounting to $26,642,000. The rublic Utility Credit Institute gave this corporation $18,000,000 of new bonds in exchange for these. The reason for the reduction from $26,642,000 to $18,000,000 was that a large portion of the obligations of International Power .ecurities Corp. was held by Italian residents. The new bonds bear interest at the rate of 1% for the years 1947-1949, 2o for 1950-1951, and 376 thereafter. The bonds mature on January 1, 1970 and are to be redeemed by a cumulative sinking fund of 1% per annum starting in the second half of 1950 and increasing to 2A per annum in the second half of 1957.

/4 Government guaranteed.

/5 The status of this loan as of June 30, 1957 was as follows:

In currency In U.S. dollar of payment equivalents

Total loan 70,000,000

Disbursed and still outstanding 37,497,254 14eld by IBhD 31,497,254

U.S. dollars $ 12,212,481 12,212,481 Netherlands guilders f. 34,135,555 8,983,041 Swiss francs SwF 23,392,115 5,452,906 Danish kroner DKr 1,868,884 270,572 French francs F 1,487,626,713 4,255,225 Belgian francs BF 16,151,040 323,029 Held by 3rd parties 6,000,000

ParticipatAon without guarantee $ 5,000,000 5,o0,00 Sales without guarantee $ 1,000,000 1,000,000 Undisbursed 30,902,746 Cancelled 1,600,000 Table A-lb: ITALY - EXTERNAL PUBLIC DEBT OUTSTANIING JUNE 30, 1957 vvITH mAJOR REPORTED ADDITIONS

JULY 1 - OCTOBER 31, 1957 (CoNT.)

Page 10 6 The status of this loan as of June 30, 1957 was as follows:

Amount

Total loan (all U.S. dollars) 10,000,000

Disbursed and still outstanding 9,695,000 Held by IBAD 9,595,000 Held by 3rd parties (sale. without guarantee) 100,000 Repaid 305,000

/7 The status of this loan as of June 30, 1957 was as follows:

In currency In U. S. dollar of payment equivalents Total loan 74,628,000

Disbursed and still outstanding 21,006.399 U. S. dollars 9,240,947 9,240,947 Swiss francs 38,910,484 Belgian 9,065,634 francs 35,576,583 711,532 Netherlands guilders 4,466,273 1,175,335 Norwegian kroner 5,806,797 812,951 Undisbursed 53,621,601 Lffective- Lortion 44,558,601 IBRD funds Participation funds 1,000,0 Not yet effective 9,063,000 9,063,000 Table A-lb: ITALY - EXTERNAL ?UBLIC DEBT OUTST,NDING JUNE 30, 1957 WITH rAJOR REPORTED ADDITIONS

JULY 1 - OCTOBER 31, 1957 (CoNT.)

13 Guaranteed by Istituto Mobiliare Italiano Page 11 /9 Of this amount, $822,450 was undisbursed as of June 30, 1957. /10 Of this amount, $8,407,428 was undisbursed as of June 30, 1957. 11 Completely undisbursed.

/12 Of this amount, $7,402,044 was undisbursed as of June 30, 1957.

/13 The agreement provides that the United States may elect to accept either real property and improvements to real property or local currency instead of U.S. dollars for repayment of this obligation, to be used for U.S. government purposes, including cultural and educational programs.

/14 These bonds were given in exchange for SwF 17,440,000 First Mtge. Ref. S.F. Gold Series B bonds 612, 1930-1960 of the Piedmont Hydro-Electric Co. plus unpaid interest from April 1, 1940 to December 31, 1946 in the amount of SwF 5,242,028. The new bonds are dated January 1, 1947 and mature January 1, 1977. They bear interest at the rate of 1, per annum from January 1, 1947 to January 1, 1950, at 24 from January 1, 1950 to January 1, 1952, thereafter. and at 3"

1l5 This loan is secured up to 50p by earmarked gold. It was granted to the "Istituto Centrale per il credito a medio termine a favore delle medie il piccole industrie" by la Societe de Banque Suisse, le Credit Suisse and l'Union de Banques Suisses. The proceeds of this loan were transferred through the EPU, and the cumulative accounting deficit of Italy was thereby reduced.

/16 This loan bears interest of 34 per annum during the first six years, 4V1 from the seventh to twelfth years, and 41 thereafter. The proceeds of the loan were transferred through the EPU, thereby reducing Italy's cumulative accounting deficit. Before ratification of the agreement, 5of4 of the loan was to be transferred Payments to Italy in gold. of principal and interest are to be made in free Swiss francs.

_/17 This credit was reported in the Italian press (24 Ore, Milan, Italy, May 13, 1956) and no further available. information is

/18 These bonds were in default from July 1, 1940 until 1948. At that time interest due July 1, 1940 through September 15, 1947 was paid at the old contractual rate of 5%. The debt adjustment plan provides that the bonds will mature on July 1, 1977 and bear interest at the rate of 1lo per annum from September 16, 1947 to July 1, 1950, Table A-1b: EXTERNAL ITALY - PUBLIC DEBT OUTSTANDING JUNE 30, 1957 W.ITH MAJOR REPORTED ADDITIONS

JULY 1 - OCTOBER 31, 1957 (CONT.)

Page 12 /L18 (cont.)

at 24 thereafter to July 1, 1952, and at 3,0 thereafter. The bonds are to be redeemed by an annual sinking fund of 1p per annum from January 1, 1953 to June 30, 1957 and 2" thereafter.

/19 This loan is denominated in U.S. dollars, but any instalment of principal and interest may be paid either in U.S. dollars or in Italian lire. If payment is made in U.S. dollars, interest on the outstanding balance is calculated at 3,J p.a.; if the payment is made in Italian lire, interest is calculated at 4% p.a.

IBRD - Economic Staff December 20, 1957 Table 2

National Income and Expenditures 1954 - 1956 (in billions of current Lit.)

Sources of Income 1954 1955 1956 Expenditures 1954 1955 1956

Agriculture, fishi.ng and forestry 2,462 2,604 2,571 Consumption Industry 4,001 4,426 4,699 - private 8,653 9,229 9,900 Trade, transport and services 2,463 2,705 3,019 - public 923 1L 1,096 Net product of public administration 1,091 1,231 1,332 Total consumption 9,576 10,239 10,996 Duplicated items -872 -813 -831 Gross investmentl/ 2,489 2,940 3.13 Net product at factor cost 9,144 10,153 10,790 Total use of resources Taxes not included in the estimate internally 12,065 13,179 14,126 of gocds and services 1,634 1,656 1,851 Exports of goods and Net product at market prices 10,778 11,809 12,641 services (incl. Net income from abroad 20 17 27 receipt of incomes Depreciation 1,022 1,120 1,210 from abroad) 1,433 1,620 1,894 Cross national income 11,820 12,946 13,878 Imports of goods and services (incl. income payments abroad) 1,678 1,853 2.142 Total available Total available resources 13,498 14,799 16,020 resources 13,498 14,799 16,020

1/ Inclusive of inventories. Table I

Financing of Investment 1955-56 (in billion Lit.)

-1955196 Amount % Amount % Sources of Private Investment

Issue of stocks and bonds 159 5.4 244 7.8 Investments of special institutes.for agricultural, real estate & housing credit 93 3.2 93 3.0 Investments of special institutes for mortgage credit 137 4.6 119 3.8 Medium and long-term investments of credit institutions 35 1.2 60 1. 424 14.4 516 16.5 Less funds supplied to above institutes and institutions by the Treasury 49 1.7 _4 1.3 375 12.7 475 15.2

Investments of insurance companies 43 1.5 4O -1-- 418 14.2 515 16.5

Depreciation reserves 944 32.1 1,025 32.7 Self-financing, direct savings and short-term credits _43 21.9 664 21.2 Total 2,005 68.2 2,204 70.4

Sources of Public Investment

Budgetary surplus over current expenditures 187 6.4 336 10.8 Treasury bonds 248 8.4 204 6.5 Postal Savings funds 108 3.7 110 3,5 Railroad bonds 72 2.4 - 5 - 0.2 Bonds of parastatal entities 20 0.7 19 0.6 Bank of Italy and Treasury note issue 101 3.4 - 21 - 0.7 Borrowings by local and regional administrations 53 1.8 51 1.6 Investments by insurance companies and credit institutes 76 2.6 80 2.6 Other advances on capital account 37 1.3 93 3.0 Funds of Cassa per il Mezzogiorno 13 0.4 29 0.9 Social security funds 20 0.7 30 1.0

Total 939 31.8 926 29.6

Grand Total 2,940 100.0 3,130 100.0 Table 4

Agricultural Production

Percentage Percentage Percentage Change Change Change 1936/39 1953 1954 1953/54 1955 1954/55 1956 1955/56

General Index (1948 = 100) 111 139 132 - 5 141 + 7 139 - 1

(millions of metric tons)

Wheat 7.6 9.1 7.3 -20 9.5 +30 8.7 - 8

Maize 3.0 3.2 3.0 - 6 3.2 + 7 3.4 + 6

Potatoes 2.7 3.1 3.2 + 3 3.4 + 6 3.4 -

Tomatoes 0.9 1.4 1.5 + 7 1.6 + 5 1.7 + 6

Sugar beets 3.3 6.2 6.6 + 6 9.2 +30 7.1 -23

Grapes 6.2 8.3 8.0 - 4 9.3 +16 10.0 + 8

Olives 1.4 2.0 1.7 -15 1.1 -36 1.0 - 9

Citrus fruits 0.7 1.0 1.0 - 1.0 - 1.1 +10

Meat 0.7 0.7 0.7 - 0.7 - 0.8 +14

Milk 5.0 6.5 6.7 + 3 7.0 + 4 7.2 + 3 TaL-_

Industrial Production

Index 1950 = 100

Annual Average

Jan. - Aug. 1954 1955 1956 1956 1957

Total 144 196 170 166 180

Main Categcries

Manufacturing 143 156 168 164 177

Foods 115 118 125 117 123

Textiles and clothing 107 95 102 98 111

Cotton 97 84 90 86 99

Silk and artificial fabrics 73 68 72 70 81

Metallurgical 165 202 221 214 243

Engineering 137 156 170 168 182

Chemicals and products 200 229 255 252 264

Chemicals 185 221 245 242 25,8

Coal and petroleum 284 304 338 338 349

Artificial fibers 124 128 139 140 139

Mining (incl. natural gas) 194 233 303 283 389

Manufactured gas and electricity 139 147 156 154 163

Sources: "Bullettino mensile di statistica" and/or "OEEC monthly bulletin." Table 6

Prices and Wages

(1938 = 1)

Percentage Change 1955 1956 1957 During Dec. June Dec. June 1955

Wholesale prices (total) 53.7 53.7 54.3 52.3 +1.1 Foodstuffs 60.3 61.6 60.2 55.2 -0.2 Raw materials 60.0 61.1 61.8 58.5 +3.0 Semi-finished products 50.4 51.1 53.6 53.0 +6.3 Finished goods 52.4 51.7 51.5 49.4 -1.7

Cost of living (total) 60.6 63.0 63.1 63.4 +4.1 Food 71.4 74.3 73.7 73.1 +3.2 Clothing 62.7 62.6 63.1 64.4 +0.6 Rent 23.3 26.8 27.4 32.0 +17.5

Wage rates (gross)'/ Industry 81.6 86.2 87.6 88.3 +7.4 Agriculture 90.7 93.8 94.0 102.8 +3.6 Commerce 81.8 87.5 88.0 89.2 +7.6 Transportation 79.6 84.2 84.6 85.3 +6.3 Government 63.1 63.5 69.0 69.0 +9.4

1/ Including family allowances. Table 7

Net Investments in Shares and Bonds of Joint-Stock Companies./

(in billions of Lit.)

i25-41955 1956

Banks, stock market, financial and insurance institutions 6.0 11.9 6.2

Transportation and communications 14.0 14.7 29.8

Electricity, gas and water 16.1 21.0 32.3

Hotels, rest homes and amusements 1.5 1.2 2.4

Housing, public works and land reclamation 1.4 3.0 9.2

Food products 3.6 6.7 10.6

Wood - 0.5 0.4

Non-metallic minerals 5.7 4.5 5.6

Steel, metallurgical and mechanical products 60.6 47.0 72.3

Chemical products 10.3 8.6 16.5

Paper and printing 2.7 1.8 3.7

Leather and hides 0.4 0.5 1.4

Textiles and clothing 10.4 8.8 15.8

Miscellaneous products 2.6 0.9 1.2

Retail trade and sundry services 1.6 0.9 1.5

Natural gas and petroleum 18.0 27.3 34.9

Total 153.0 159.3 243.8

j1/ Excluding IRI. Table 8

Total Recourse of the Several Economic Sectors to the Banks, Special Financial Institutions and the Capital Market (1956 breakdown and 1955-56 totals; also annual increases in billion Lit.)

Special Stocks Percentage Financial and Distribution Economic Sector Banks Institutions Bonds Total 1956 1955 1. Private institutions 54.2 - - 54.2 4.8 5.2 2. Para-statal agencies 44.9 4.4 - 49.3 4.4 2.6 3. Banks, stock market, financial and insurance institutions 12.0 7.5 6.2 25.7 2.3 2.2 4. Land transport, internal air and water transport 9.1 0.1 3.2 12.4 1.1 0.9 5. Telephone, telegraph and postal services 15.5 12.2 14.4 42.1 3.7 3.3 6. Maritime transport 8.9 - 1.3 12.2 19.8 1.7 1.7 7. Electricity 7.1 23.6 32.0 62.7 5.5 8.9 8. Gas and water - 1.2 4.9 0.3 4.0 0.4 0.3 9. Public amusements 0.9 1.2 1.5 3.6 0.3 0.9 10. Hotels and rest homes 6.6 2.6 0.9 10.1 0.9 0.6 11. Housing ( 62.8 2.4 ( 12. Public works ( 52.5 12.9 6.8 ( 13. Land reclamation 2.8 - 3.7 - - 0.9 -0.1 -0.4 14. Agriculture 36.7 41.1 - 77.8 6.9 6.4 15. Farm equipment and primary materials 10.3 - 0.3 10.6 0.9 0.1 16. Cereals and other food products 119.8 34.1 10.3 164.2 14.5 16.1 17. Wood and related products 12.8 1.7 0.4 14.9 1.3 1.7 18. Mining 6.4 13.7 1.8 21.9 1.9 1.1 19. Fabrication of non-metallic minerals 16.5 5.4 3.8 25.7 2.3 2.0 20. Petroleum and natural gas 39.4 - 34.9 74.3 6.6 6.0 21. Metallurgical industries 38.5 13.9 20.7 73.1 6.5 6.6 22. Mechanical industries 75.6 - 51.6 127.2 11.2 9.9 23. Chemical products 6.4 6.7 15.9 29.0 2.6 4.5 24. Rubber 3.8 - 0.4 0.6 4.0 0.4 1.0 25. Paper and printing 6.1 4.9 3.7 14.7 1.3 1.1 26. Leather and hides 5.7 - 1.4 7.1 0.6 0.3 27. Textiles and clothing 21.7 - 1.5 15.8 36.0 3.2 - 1.3 28. Miscellaneous products 3.0 2.3 1.2 6.5 0.6 - 0.2 29. Retail trade and sundry services 16.3 4.7 1.5 22.5 2.0 4.9 Total 1956 632.3 253.8 243.8 1,129.9 100.0 100.0 1955 521.4 291.4 159.3 972.1 Table 9

Monetary Survey

(in billions of Lit. - end of period)

June 195 1955 1956 1956 1957

Money supply 4,036 4,499 4,886 4,399 4,760 of which: currencyl/ 1,507 1,651 1,797 1,553 1,729 deposit money 2,529 2,848 3,089 2,846 3,031 Quasi-money (savings deposits) 2,094 2,465 2,903 2,635 3,074

Assets of the Banking System: Loans to the private sector 1. Bank of Italy 175 185 213 177 177 2. Other banks 3,556 4,087 4,727 4,244 4,813 a. own resources 3,310 3,855 4,403 3,982 4,516 b. Bank of Italy resources 246 232 324 262 297 Loans to the Government 1. Bank of Italy 1,068 1,165 1,132 992 1,070 2. Other banks 1,223 1,388 1,495 1,470 1,406 Foreign assets 423 481 565 515 595

1/ Excluding Treasury notes, coin and cash held by banks. Table 10

Liquidity of the Banking SVstemi/ (billions of Lit.)

June 1954 1 1956 1956 1957 Assets

Cash (incl. deposits at the Bank of Italy) 263 280 299 248 279 Credit to the Government 1,223 1,388 1,495 1,470 1,534 Credit to the private sector 3,556 4,087 4,727 4,244 4,813

Liabilities

Demand deposits 2,529 2,848 3,089 2,846 3,031 Time deposits 2,094 2,464 2,903 2,635 3,074 Borrowing from the Bank of Italy 246 232 324 262 297

1/ Includes commercial banks as well as savings banks and so-called cooperative banks, to which reserve requirements do not apply. Table 11

Government "Appropriations" Budget

(in billions of Lit.)

1954/55 1955/56 1956/57 19578/5

Authorized expenditure

Current civilian expenditures 1,739 1,924 2,031 2,059 Current military expenditures 458 474 456 5C6 Investment expenditures 519 474 471 505 Other capital expenditures 37 20 25 30

Total authorized expenditures 2,753 2,892 2,983 3,100

Assessed revenue

Taxes on income and property 465 537 592 636 Indirect taxes and other current revenue 1,831 1,990 2,055 2,213 Capital revenue 59 44 19 31

Total assessed revenue 2,355 2,571 2,666 2,880

Deficit - 398 - 321 - 317 - 220

1/ Final estimate. 2/ Initial estimate. Table 12

Foreign Trade

(1953 = 1C)

11 952 1953 1954. 1955 195 Volume

Exports 104.8 94.4 100 107.4 123.3 147.4

Imports 82.3 92.2 100 103.7 103.7 124.7

Exports : Imports 127.3 102.4 100 103.6 110.5 118.2 Unit Value of Trade

Exports 111.9 104.7 100 99.4 98.3 103.8

Imports 113.7 109.8 100 97.6 99.7 104.6

Terms of trade 98.4 95.3 100 101.8 98.6 99.2 Table 13

Commodity Distribution of Exports (in millions of $)

1951 1952 1953 1954 1955 1956

Foodstuffs 328 315 365 403 419 494

Textiles 616 331 354 338 362 389

Metals and minerals 65 75 69 72 101 163

Machinery 298 318 307 323 408 507

Coal and coke - 8 3 2 2 4

Mineral oils 48 90 144 180 164 172

All other 293 250 265 320 400 428

Total 1,648 1,387 1,507 1,638 1,856 2,157

Source: "Commercio con l'Estero" by the Central Institute of Statistics of Italy Table 1A

Commodity Distribution of Imports

(in millions of $)

1951 1952 195 1954 195 1956

Foodstuffs 448 427 470 374 485 570

Textiles 501 475 437 426 389 438

Metals and minerals 190 256 258 288 354 453

Machinery 197 314 357 362 360 387

Coal and coke 224 190 163 149 181 216

Mineral oils 210 261 299 345 361 419

All other 398 413 437 494 580 687

Total 2,168 2,336 2,421 2,438 2,710 3,170

Source: "Commercio con l'Estero" by Central Institute of Statistics of Italy. Table 15

Regional Distribution of Trade

(in millions of 0)

1952 1953 1954 1955 15 EPU Area

Exports 906 986 1090 1182 1394 Imports 1317 1622 1680 1776 2010 Balance -411 -636 -590 -594 -616 U.S. and Canada

Exports 149 158 141 176 234 Imports 1 360 316 __3 560 Balance -392 -202 -175 -257 -326 Other Dollar Area

Exports 51 48 75 90 117 Imports 71 59 -4 61 100 Balance - 20 - 11 + 26 +29 + 17 Other Countries

Exports 281 315 332 408 412 Imports 407 380 393 Q 500 Balance -126 - 65 - 61 - 32 - 88 Total

Exports 1387 1507 1638 1856 2157 Imports 2336 2421 2438 2710 3170 Balance -949 -914 -800 -854 -1013 Table 16

Percentage of Total Imports of Certain Staple Commodities Suplied by EPU Countries

(Percentage of total value)

1950 - 195_ 1st half 2nd half 1st half 2nd half 1952 1953 195L 1955 1956

Cotton 19 41 44 29 15 24 26 28 19

Wool 82 87 85 84 96 89 96 94 86

Wheat 12 0 14 20 11 26 28 24 46

Coal 78 84 51 46 51 75 69 44 34

Crude Oil 21 27 30 28 26 62 41 93 64

Copper 28 37 44 23 40 77 79 55 53

Total 36 41 40 34 57 67 67 70 63 Table 17

Imports from U.S. and Canada

(in millions of $)

1951 1952 1953 1924 195 1956

Cereals and flour 67.2 88.9 53.0 2.7 4.6 14.3

Cotton 123.4 133.4 57.9 49.2 38.6 48.4

Coal 85.6 70.1 28.3 35.8 92.9 122.2

Oils and fats (foods) 12.3 2.7 10.4 0.1 - 2.1

Oils and fats (ind.) 7.8 8.7 6.7 10.0 17.5 21.0

Iron and steel 12.6 18.0 15.1 15.0 16.9 14.9

Chemicals 31.9 34.0 27.2 32.6 40.0 50.5

Machinery 72.7 95.8 77.4 84.8 73.2 77.0

Others 90.3 89.2 83.5 85.8 150.9 208.5

Total 503.8 540.8 359.5 316.0 434.6 588.9 Table 18

Exports to U.S. and Canada

(in millions of P)

1951 1952 1953 1954 1955 1956

Foods 26.4 31.2 36.8 38.6 41.8 46.5

Textiles and clothing 25.8 25.0 35.5 28.8 37.6 49.8

Base metals 14.2 19.2 15.1 9.0 7.0 22.2

Machinery 13.2 27.6 25.8 19.6 27.9 49.8

Others 43.1 46.1 44.7 45.2 61.7 64.3

Total 122.7 149.1 157.9 141.2 176.0 232.6 Table 19

Goods and Services Transactions with EPU Area

(in millions of $)

1951 1952 195 195 252 1956

Trade balance (exports- imports f.o.b.) + 92.7 -339.8 -528.4 -466.2 -470.9 -424.1

Foreign travel + 64.7 + 61.7 + 86.9 + 85.3 +123.0 +147.8

Investment income + 0.9 - 3.8 - 2.7 - 8.3 - 15.6 - 15.9

Workers' earnings + 22.9 + 37.3 + 40.4 + 40.2 + 45.0 + 62.0

Other services - 46.1 - 7.9 - 10.0 + 7.7 + 31.4 - 12.1

Balance goods and services +135.1 -252.5 -413.8 -341.3 -287.1 -242.3 Table 20

Goods and Services Transactions with Convertible Currency Areas

(in millions of $)

1 1952 1953 1054 1955 1956

Trade deficit (imports- exports f.o.b.) -320.8 -329.5 -172.2 -134.8 -184.3 -215.7

Foreign travel + 7.0 + 12.3 + 41.6 + 51.2 + 64.4 + 61.1

Investment income - 6.7 - 10.2 - 5.0 - 6.5 - 4.6 + 9.1

Emigrant remittances + 21.2 + 28.2 + 43.2 + 49.2 + 57.0 + 62.8

Other services - 24.0 + 0.4 + 40.5 + 78.1 + 47.3 + 81.7

Deficit on goods and services -322.7 -298.8 - 51.9 + 36.8 - 20.2 - 1.0 Table 21

Balance of Payments (transactions basis) (in millions U.S. V)

1. Current Account 1951 1952 1953 1954 1255 1956

Exports (f.o.b.) 1641.3 1378.6 1473.1 1581.5 1777.5 2094 Imports (f.o.b.) -1915.2 -2124.3 -2212.8 -2230.5 -2439.0 -2800 Transportation and insurance (net) 101.0 -57.5 -46.7 -19.6 -18.2 -10 Tourism (net foreign travel) 71.9 75.0 130.7 138.1 190.1 215 Emigrant remittances 72.9 107.0 125.6 118.6 124.7 173 Investment income -7.3 -12.9 -5.7 -12.1 -17.7 -27 Government services 2.8 -3.8 -3.1 +9.0 2.1 13 Other -0.5 41.6 88.5 125.1 135.8 138 Sub totals -235.1 -596.3 -450.4 -289.9 -244.7 -204 2. Special Receipts

Offshore procurements 0 1.2 61.3 132.5 128.8 81 Troop expenditures 13.4 14.9 14.1 7.1 7.6 30 Infra structure 0 25.9 33.7 13.8 26.6 8 Sub totals 13.4 42.0 109.1 153.4 163.0 119 Deficit -221.7 -554.3 -341.3 -136.5 -81.7 -85

3. Financing of DeficLt (including capital movements)

U.S. aid 277.4 199.6 124.4 63.3 37.2 22 Contractual repayments 28.0 -42.9 -46.2 -37.8 -29.9 -41 Trade credits 66.6 191.4 127.3 -4.7 -42.7 23 Other credits (net) 63.3 90.7 65.4 194.2 244.6 222 Short term assets and liabilities (netW -155.4 93.1 57.1 -55.4 -108.6 -110 Sub totals 223.9 531.9 328.0 159.6 100.6 116

4. Errors and Omissions -2.2 22.4 13.3 -23.1 -30.4 -31 Total 221.7 55.3 3Ll.3 16. 70.2 82 1/ Minus (-) represents &n improvement in position. Table 22

EPU Position

(in millions $)

Cumulative Gold or $ net amount received by of gold or Surplus or Credit accumu- or paid in Credit or $ received deficit lated or repaid by Italy debit bal- or paid by during by Italy during during ance end Italy at end periodl/ period.2/ period3/ of periodl/ of period/

1954 lst quar. -51.2 -16.4 -34.8 -100.3 - 63.4 2nd quar. -59.6 -22.0 -76.5 - 83.3 -139.9 3rd quar. -29.8 +27.4 -18.2 - 95.0 -158.2 4th quar. -52.3 -21.9 -30.4 -116.9 -188.6

1955 lst quar. -77.2 -35.3 -41.9 -152.2 -230.4 2nd quar. -68.6 -30.5 -38.2 -182.7 -268.7 3rd quar. +46.9 +22.7 +24.0 -160.0 -244.6 4th quar. -91.7 -19.0 -72.5 -179.0 -317.2

1956

1st quar. -37.2 - 6.0 -31.2 -185.0 -348.3 2nd quar. -48.4 +23.0 -71.3 -162.0 -419.7 3rd quar. +26.2 +12.7 +13.6 -149.3 -406.1 4th quar. -53.1 - 6.9 -46.4 -156.2 -452.5

1957

1st quar. -67.0 -10.8 -56.5 -166.9 -508.9

1/ Surplus +); deficit (-) 2/ Credited accumulated (+); credit repaid (-) 3/ Received (+); paid (-) A/ Credit (+); debit (-) 5/ Received (+); paid (-) Table 23

Official Gold and Foreign Exchanae Reserves

(in millions of $)

Change Change Change End of during End of during End of during 1954 _1954 1955 1j. 1956 1956

Gold 346,2 - 352.1 5.9 337.4 - 14.7

Convertible foreign exchange 485.3 +150.9 675.3 190.0 813.6 138.3

EPU balance -116.9 - 21.7 -179.0 - 62.1 -156.2 22.8

Payment agreements balances and other currencies 176.1 - 73.8 150.9 - 25.2 114.3 - 36.6

Total 890.7 + 55.4 999.3 +108.6 1109.1 109.8