THE NEW LIRA: COSMETIC OR CURRENCY?
The new Italian lira, which will be worth 1,000 of the old, is due to appear next year. It is intended to make accounting easier and to reduce domestic inflation. Will it be more than a symbolic gesture?
That depends on the supporting policies. If government spending is curtailed, the immense public sector deficit reduced and monetary growth brought into line with a steady rate of economic growth, the new lira may help.
It will be a fairly large unit, worth about $0.65, 0.43 [pound sterling], DM1.46 and Ffr4.66. This means taht it will have to be divided, as it was between the wars, into hundredths, or centesimi. Each of these will replace the 10-lira piece, a coin seldom seen nowadays, and good for nothing but to throw into the Trevi Fountain. The sight of one centesimo will not do much for morale; it will take 65 of them to buy a newspaper, assuming that prices do not rise.
This is a large assumption to make in italy, where inflation rates have been among the highest in the industrialized world. From 4.8% in 1970, inflation reached 21.2%