The recent climb by the U.S. dollar is focusing attention here on the lira and prompting calls for reform of the Italian currency.
The proposals include devaluation, sought by many business groups here; a plan to push the acceptability of the European currency unit (ECU) in international payments, and another project to replace the current lira denominations with a "heavy lira."
The value of the dollar has been above 2,100 lira, and closed yesterday at 2,073.50. The steady erosion of the lira against the dollar has been good news for American tourists eager to prolong their visits here or to lengthen their shopping lists. And it has given a hefty boost to Italian exports to the United States.
The dollar's rise, however, threatens the Italian government's slow but steady advance against the nation's chronically high inflation. The inflation rate recently dropped to 9 percent from double-digit levels, but with Italy totally dependent on imported oil as well as imports of most other necessary raw materials -- most of which must be paid for in dollars -- there is a risk of a renewed burst of inflation as well as further worsening a badly skewed balance of payments.
Last year, the Italian trade deficit rose to almost 20,000 billion lire (around $10 billion), about twice that of 1983.
At a recent economic "summit meeting" here headed by Socialist Prime Minister Bettino Craxi and attended by Foreign Minister Giulio Andreotti, Treasury Minister Giovanni Goria and the ministers of the budget, foreign trade, industry and state holdings, it was decided to increase as much as possible the use of ECU's for official transactions and international payments in general.
At the same time as it has been falling against the dollar, the lira has done well against other European currencies -- too well, in the view of many Italian businessmen and industrialists. Over the course of 1984, the so-called "strong lira" or "lira forte" has been revalued by an average of 2.3 percent with regard to European currencies as a whole, and by 5.7 percent over the English pound and 4.9 percent over the West German mark. (An exception was the French franc, which rose 3.1 percent in relation to the lira.) Critics here say this is largely a result of the high interest rates that the government has been insisting on at home as part of its anti-inflationary policy. The result, when combined with Italy's high production costs, is that Italian goods have become increasingly less attractive to markets other than the United States.
Although the major trade losses last year were with countries such as the Soviet Union, Libya, Iran, Nigeria and Algeria -- all principal suppliers of energy -- in the first nine months of 1984 Italy's trade deficit with the rest of the EEC grew to 2,500 billion lire ($1.2 billion) from 1,500 billion lire in the same period of 1983.
The result has been a growing call from businessmen and industrialists for devaluation, at least with regard to the other European currencies. However, Italian Treasury Minister Goria has ruled out devaluation, saying itwould set off a new round of inflation.
Like other top Italian economic officials, Goria favors the eventual introduction of the so-called "heavy lira," which would mean getting rid of some of the Italian currency's excessive and confusing zeros.
A proposal prepared by the Bank of Italy would turn today's 1,000 lira bill into one lira or perhaps 10 lira, in much the same way as the French introduced the new franc 24 years ago.
However, most economists here agree that the changeover, which is bound to take some time, cannot be launched until the current trend of industrial recovery and falling prices is consolidated.
"Unless the economy is doing very well, the introduction of the heavy lira -- which must come sooner or later -- would be unsettling," says Carlo Ferroni, deputy director of "Confindustria," the Italian national manufacturers' association. He says Italy ought to wait until it has brought its budget deficit under control and its inflation into line with the lower levels of its European partners.