Rome Embassy Files, 851—Italy—Financial Directive, Vol. LIX, Lot 56A211, Box 304

The Combined Chiefs of Staff to Allied Force Headquarters 92

This message is Fan 583.

1. In order further to implement the joint declaration of the President and the Prime Minister respecting Italy of 26 September 1944, you should take action as rapidly as possible in conformity with the following paragraphs, which supplement the Directive contained in Fan 487.93

Control of Italian External Assets and External Transactions

2. The requirement that the Allied Commission approve Italian external financial transactions prior to their execution will be suspended. The Italian Government will be required, as a condition to the relaxation of such control, to keep the Allied Commission currently informed in such detail as the Commisison shall find necessary of the status of Italian external assets and of Italian external financial transactions. In conjunction with this action, you will inform the Italian Government that it will be expected to take the following steps:

To establish and maintain an effective foreign exchange control agency.
To adopt measures in support of the economic warfare objectives of the Allied Governments.

A program for the development of the necessary measures shall be worked out by the Italian Government with the British and American Embassies in Rome. The Allied Commission will furnish all possible assistance to the two embassies in this connection.

You will further inform the Italian Government that failure to take the steps specified above within a reasonable period of time will result in the reimposition of prior control by the Allied Governments through the instrumentality of the Allied Commission.

3. You should request the Italian Government to consult with the Allied Commission before authorizing the use of Italian external assets for the purpose of paying claims arising prior to 8 September 1943. All questions of this nature should be referred to the Combined Chiefs of Staff for guidance.

4. The supervision exercised by the Allied Commission over the budgets of Italian diplomatic missions in neutral countries will be suspended (reference Tam 576).

5. As soon as the Italian Government gives assurance that it assumes responsibility for ensuring the payments will not be made to undesirable persons, screening and control by the Allied Commission of outpayments for remittances from foreign countries will be suspended. Remittances to Italy from neutral countries should continue to be channeled through banks in the United States or the United Kingdom until the measures referred to in Paragraph 2B are taken by the Italian Government.

6. The Allied Commission will suspend supervision and approval of arrangements concluded by the Italian Government with Allied and neutral countries concerning the financing of foreign trade, except it may be required to ensure that proceeds of export sales will be available for the purposes specified in Tam 136 and for meeting other essential Italian expenditures. (See also Paragraph 3 above.) This directive is not to be construed as altering the policies laid down in Tam 456 with respect to Italian export trade.

7. The Allied Commission will report to Allied Force Headquarters and will keep the Embassies of the United States and the United Kingdom informed concerning any external financial transaction undertaken or permitted by the Italian Government, or the existence of any policies or conditions respecting Italian external finances, which it deems prejudicial to the interest of the United Nations, together with its recommendations for remedial measures. In any such case, you may take such action as you deem necessary in order to protect the interests of the United Nations. You should report to the Combined Chiefs of Staff any action you may take in this regard. [Page 1268] You should consult the Combined Chiefs of Staff before ordering the reimposition of any prior controls over Italian external transactions.

8. The relaxation of controls over Italian external assets is not to be construed to prejudice the rights of the Allied Governments under the armistice terms with respect to Italian foreign assets nor to prejudice or affect the status of Italian property in Allied countries which has been subjected to exceptional war measures such as sequestration, vesting, and freezing.

Responsibility of Italian Government and Allied Commission for Internal Finances

9. The Allied Commission will confine its intervention in Italian fiscal matters and other internal financial affairs to cases involving Allied military necessity. The Allied Commission should advise and assist the Italian Government on financial matters in respect of Italian Government territory only when requested by the Italian Government and should give such advice and assistance at high levels.

10. A. Full information will be made available to the Italian Government concerning the volume of Allied Military currency issued by the Allied Forces in Italy, the purposes for which such currency has been expended, the amounts expended for particular purposes, and other Allied financial operations in Italy, except as it may be necessary to withhold such information on grounds of military security. The books and other records of the Allied Financial Agency and of other Allied agencies must not be released to the Italian Government, however, except as specifically authorized by the Combined Chiefs of Staff.

B. You should report to Combined Chiefs of Staff the action which has been taken pursuant Paragraph 2 of Tam 331 of 26 October 1944, on the subject of informing the Italian government regarding amounts of Allied military lire issued.

Allied Financial Agency

11. All functions performed by Allied Financial Agency with reference to territory which has been returned to the Italian government should be promptly terminated except as may be required under paragraph 17 below. This involves, amongst others, the following steps which it is understood have been or are being taken:

Cessation of provision of lire for purchase of goods for export (Tam 456) except in any case where the Italian government is unwilling to procure supplies covered by paragraph 2 of Tam 456 and the Allied Commander has to ensure that the supplies nevertheless come forward.
Cessation of advances to banks of lire for payment of remittances.
Cessation of collection of payment in lire for civilian supplies turned over to the Italians. There is no objection to such collection where necessary in Allied military government territory.

Allied Military Lire Currency

12. You should inform the Italian government that the respective Allied governments concerned will make replies directly to the Italian government through diplomatic channels, relative to the request of the Italian government for reimbursement in foreign exchange for Allied military lire issued and the value of requisitions made by the Allied Military forces in Italy. This request was contained in memorandum of the Italian government of 9 January 194594 to the Allied Commission and transmitted to the Combined Chiefs of Staff under cover of letter from Allied Force Headquarters, dated 28 February 1945, subject: Financial proposals by the Italian government.

13. After you have been notified by the American and British embassies in Rome that the United States and United Kingdom governments have replied to the Italian government memorandum of 9 January 1945, you should inform the Italian government that the Allied governments are prepared to accede to its request that all lire currency issues be unified under the authority of the Italian government. This request was addressed by the Quintieri–Mattioli Economic Mission to the United States government and referred by the United States government to the Combined Chiefs of Staff. In order to implement this decision, you are authorized to enter into an agreement with the Italian government under which:

The Italian government, or an Italian agency designated by it will be recognized as the issuing authority of Allied military lire, including such lire now in circulation.
Future currency needs of the Allied Forces in Italy will be met with currency issued by the Italian government or its designated agency. Pending the time when the Italian government or its agency is able to acquire sufficient currency of its own design, you should make available to the Italian government Allied military lire in such amounts as are required to meet the needs of the Allied Forces in Italy. You will obtain supplies of Allied military lire by requisition as heretofore.

14. Under the agreement to be concluded under paragraph 13, the Italian government should undertake:

To supply such lire currency and credits as may be required by the Allied military forces.
As a supplement to Italian requisitioning procedures, to establish a lira account on which the Allied Forces could draw for the purpose of making cash payments for local supplies, services and facilities. Use should be made of this account only where resort to Italian requisitioning procedures is not feasible or where the Italian government fails satisfactorily to meet requisitions by the Allied Forces (Mat 353).
To reimburse the United States and United Kingdom governments currently for the cost of printing and transporting currency made available by you to the Italian government after the effective date of the agreement in accordance with the provisions of paragraph 13 above. It should be understood by the Italian government that these arrangements are without prejudice to any claim by the 2 governments for reimbursements for the cost of printing and transporting currency issued by the Allied Forces prior to the agreement.

So long as Allied Forces use Allied military lire rather than Italian government lire, it will not be necessary to make an actual physical transfer to the Italian government of Allied military lire which are to be used by the Allied Forces. However, in order that the Italian government may be fully and currently informed of the lire issued on its behalf, records of all such issues should be kept on a basis to be agreed upon with the Italian government. In addition to the Allied military currency which you will make available to the Italian government, you may maintain a reserve of unissued Allied military lire to meet emergencies.

15. You will reserve the right in the event adequate quantities of lira currency are not made available to you by the Italian government at any time, to issue Allied military currency or to use any other currency which you may deem desirable.

16. If the Italian government makes any request for compensation or proposes any intergovernmental settlement in connection with the arrangements envisaged in paragraphs 13 and 14 above, you should inform the Italian government that such questions should be taken up by it directly with the Allied governments concerned.

17. So long as the combined command continues in Italy, you should maintain a combined agency responsible for receiving the currency needed by Allied forces, for distributing such currency to the Allied forces in all parts of Italy and for maintaining necessary records. Whether these functions should be carried on in the Allied Commission or at Headquarters level is primarily your responsibility (reference paragraph 1 C and D of Mat 554.)95

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Relation of this Directive to Other Instructions

18. The general policy in Fan 487 will be understood to apply to financial matters. Reference is made in particular to paragraphs 2B, 2C, 2D, 2E, 3A, 3C and 7A of Fan 487.

19. Previous instructions on financial matters which are inconsistent with this directive (such as certain parts of Tam airgram 24) are to be regarded as superseded. Such instructions should be carried out in keeping with the spirit of Fan 487 and this directive.

20. Until further progress is made by the Italian government in the defascistization and control of Italian insurance companies, you should request the Italian government to instruct the Italian Exchange Control authorities to consult with the Allied Commission before authorizing any external financial transactions undertaken by Italian Insurance Companies or involving the foreign branches or subsidiaries of such companies. Pending the receipt of further instructions, the Allied Commission and Allied Military Government should continue to be guided by the provisions of Tam 417 in dealing with insurance companies. With the development of the program outlined in paragraph 2B above, the controls by the Allied Commission over insurance should be relaxed gradually and integrated with those developed by the Italian government in cooperation with the British and American Embassies.

21. This directive does not relate to the matter of Allied property in Italy (reference paragraph 4E of Mat 554 and Tam 551).

  1. Informational copies sent to SHAEF, Frankfurt, for General Eisenhower, and to AMSSO (Air Ministry Special Signals Office) for British Chiefs of Staff.
  2. Not printed, but see Mr. Macmillan’s aide-mémoire of February 24, 1945, to the Italian Government, p. 1244, which was based on Fan 487.
  3. Not printed, but for summary, see despatch 858, January 26, 1945, from Rome, p. 1228.
  4. Not printed. C and D pertained to the responsibility of the Allied Financial Agency to provide an adequate volume of lire currency to Allied Forces in Italy until the Italian Government assumed responsibility for all currency.