102.1/9–546: Telegram

The Chargé in Italy (Key) to the Secretary of State

u.s. urgent

3718. For Secretary of Treasury from Tasca. Embtel 3711, September 4;72 repeated Paris 622; Moscow 188. Present govt crisis in Italy centering around person of Minister of Treasury involves essentially [Page 931] question of role of Communist Party in Italian political life. Although submitted, his resignation has not been accepted by Prime Minister.

Present Minister of Treasury Epicarmo Corbino is one of the outstanding exponents of economic liberalism in Italy which to him means full development of private enterprise, economic freedom and political liberty. In his view the lira can be saved and should be saved by a firm policy of (a) holding the line on wages; (b) reduction of manufacturing and industrial costs through the elimination of the ban on dismissals; (c) the removal of economic and financial controls which tend to smother private enterprise and impede economic recovery; (d) increase in taxation to maximum consonant with principle of maintenance of private property and payment of taxation out of current income without dissipation of basic property holdings through forced transfers to speculators and black market operators and (e) a strong emphasis on increased production as the backbone of economic and financial recovery.

On the other hand the Communists have pressed very hard for substantial increases in money wages to cover gap between cost of living and wages (in large measure this gap is a measure of destruction of Italian national wealth and income caused by war). Communists state belief that well-being of worker cannot be improved through increase in rations and reduction in cost of living. Wage payments therefore must be increased. As a corollary Communists argue that wage increases are not necessarily inflationary.

Communists’ opposition to present Minister of Treasury based on following: (a) Fact that present Minister of Treasury is a fighting exponent of private enterprise; (b) present weak technical position of lira with huge mass of liquid purchasing power in hands of banks and public gives great importance to psychology of Italians toward lira with respect to the prevention of serious inflation; (c) all measures, therefore, which may cause a shock to public confidence threaten basic stability of lira; (d) judgement of Minister of Treasury as to whether proposed economic financial measures of Govt may disturb profoundly public confidence becomes a decisive element in the final decision re the adoption of such measures; and (e) thus Minister of Treasury who is leading exponent of private enterprise becomes a decisive figure in the formulation of Italian economic policies.

Immediate cause of present crisis attributable to policy of Communist Party to agree in Cabinet meeting on Govt economic financial program and subsequently in the party press to attack such program agreed to through personal attacks on the present Minister of Treasury Corbino. As a result of organized agitation on part of Communist [Page 932] Party, instability and uncertainty in Italy has been greatly accentuated with consequent impossibility of permitting Minister of Treasury to carry through Govt’s financial program of stabilizing the lira. According to the present Minister of Treasury there must be a showdown in Italy between the forces who sincerely desire reconstruction and those who desire to keep the country in state of disorder and confusion for political reasons. He believes that the time for showdown is present.

Corbino appears to be supported in the present crisis wholeheartedly by the Democrat Christian Party of the center as well as Action Party of left. Socialists have maintained that increase of well-being of workers must come through increased production and rations and not through money wages and in general have not opposed Corbino. In fact P. Nenni, a leader of the Socialist Party is currently endeavoring to persuade Corbino to remain Minister of Treasury.

Results of the present conflict between Corbino and the Communists have included a weakening of the lira in the black market, substantial increases in prices of basic commodities throughout the country, significant decline in quotations on Govt securities and strength in stock market quotations.

Sent Dept 3718; repeated Paris 627; Moscow 190. [Tasca.]


[On September 9, 1946, Paul H. Bonner, Central Field Commissioner for Europe, Office of the Foreign Liquidation Commissioner, and Epicarmo Corbino, Minister of the Treasury of Italy, signed an agreement which came to be known as the Bonner–Corbino Agreement, or the Bulk Sales Agreement.

Article 1 provided that except for seven specified categories, the Italian Government was to acquire all of the surplus war property of the United States in Italy. Article 2 listed as categories which were not to be declared surplus by the Office of the Foreign Liquidation Commissioner:

Non-demilitarized combat material, including ammunition.
Installations owned entirely or in part by the United States.
Property in Italy of lend-lease origin in the possession of foreign governments.
Railway rolling stock and spare parts.
Aerial navigation and aerial communications facilities.
Scrap, salvage, and waste.
Property located in Italy which on September 30, 1946, had been sold or committed for sale.

The estimated original cost to the United States of this property was $368 million, and the sale price to the Italian Government was [Page 933] set at $160 million. (865.24 FLC/9–946) The full text of the agreement in Italian and in English is published in Trattati e convenzioni fra l’Italia e gli altri stati, vol. 60, Atti conclusi dal 1 gennaio al 31 dicembre 1946 (Rome, 1954) No. XXXIV, page 482.]

  1. Not printed.