Italy's `new' lira comes up against old political mess
Italy appears poised to revamp the lira and enter the big leagues of European currencies. The Italian government's resolve to do so this year might just be strong enough to overcome the usual obstacle to legislative proposals in this country: another political crisis. The plan is to relieve the lira of three burdensome zeros that create arithmetic confusion for Italians and tourists alike. This will make the new ``heavy'' lira worth 1,000 times the current unit. The proposal is on hold as Italian politicians try to break yet another deadlock in Rome - the fifth in the past year - and form the country's 48th postwar government.
It was such a crisis last year that stalled a previous ``heavy lira'' bill enthusiastically backed by the government of then-Prime Minister Bettino Craxi. The architect of the pending bill is Treasury Minister Giuliano Amato.
Proponents of the ``new'' lira contend that national accounting is in dire need of streamlining now that trillion-lire figures are commonplace. The appearance of those trillions shows that Amato and company have the economy on their side of the argument; Italy has recently overtaken Britain as the world's fifth-largest economy, as measured by gross national product.
But opponents of the new lira argue that it would rekindle inflation by giving consumers the false impression that products were cheaper. They also say inflation would jump, because old lira prices would be rounded up to the nearest new lira. For example, a 13,500-lire item would be sold for 14 new lire. Backers of the new lira contend that these fears are groundless now that the Italian inflation rate has fallen to less than 5 percent.
Proponents also point to the support of the Bank of Italy, the country's central bank. A report by the bank said that ``the damage to Italy's image abroad caused by today's virtual annihilation of the value of the lira is another reason for revising the monetary unit. Faced with often astronomic figures, people ... unaware of the strength of [Italy's] industrial system can be misled into concluding that our economy is weak and fragile.''
The fate of the lira will depend in part on whether the prime minister-designate, Ciriaco de Mita, can regroup the five political parties that make up Italy's ruling coalition. Analysts say a de Mita failure could change the political balance. By the time equilibrium (if such a word can apply to Italian politics) was regained, the momentum for the new lira could be lost.