Historical Sketch

Until the end of the 18th century, the Italian peninsula was subdivided into a multitude of larger and smaller states. In 1797, Napoleonic France conquered the territory. A few borderlands got annexed, and the rest was partitioned into the Kingdom of Italy in the north and the Kingdom of Naples in the south, ruled by Napoleon himself and his son-in-law, respectively. Tuscany and a few lesser states in the center kept a limited independence. The pre-Napoleonic order remained only on the islands of Sardinia and Sicily.

After Napoleon's fall of, the Italian map was again re-organized at the 1815 Congress of Vienna, and much of the pre-Napoleonic order got restored. In the north, the Kingdoms of Sardinia and Lombardy-Venice were established, in the center the lesser monarchies of Tuscany, Lucca, Modena, Parma and the Papal State, and the Kingdom of the Two Sicilies (Naples and Sicily) in the south.

In the late 1850, the nationalist movement for the unification of Italy gained power. During 1859-1860 almost all territories succumbed to the revolutionary forces and pledged allegiance to the king of Sardinia as future Italian king. In 1861, the Kingdom of Italy was proclaimed. Two territories were still absent, Venice held by Austria-Hungary and Latium still under Papal rule. Both were militarily conquered in 1866 and 1870, when finally, also Rome joined Italy and was made capital city. The Italian monarchy remained until after the Second World War, it got abolished by plebiscite in 1946, and the Republic was proclaimed.

Monetary History Overview

During the Napoleonic period, many of the ancient currencies and accounting systems had been replaced by the French standard, usually retaining the traditional name "Lira" (Pound), such as the Sardinian Lira of 1816. With the unification in 1861, the Kingdom of Italy adopted the Italian Lira in the bimetallic French standard and basically a continuation of the Sardinian monetary order. The territories of the former states of Naples & Sicily, Lombardy-Venice, Tuscany and Papacy abolished their currencies until 1866. The former National Bank of Sardinia was renamed Bank of Italy and absorbed the issuing institutions of the other states, except for the South where the Banks of Naples and of Sicily retained their issuance privilege for paper money until 1926. In 1865, Italy joined the Latin Monetary Union as a founding member, and Italian coins circulated widely throughout the different member countries. In the run-up to World War I, the gold standard got suspended in August 1914. The wartime devastations caused an economic decline, and the Lira depreciated strongly. In December 1927, the Lira was finally repegged to gold at around a quarter of the pre-war value. Only for short time, however, the World economic crisis of the early 1930s caused a suspension of the gold peg. In 1936, the peg was restored after a 41% devaluation against gold. Italy joined Germany during the Second World War, and the Lira got de facto pegged to the German Reichsmark, although the official gold peg remained in place. In 1943, the Allied forces invaded Italy, and the Fascist government was overthrown. The military administration fixed an exchange rate of the Lira to the US Dollar at about 20% of the pre-war value. Currency convertibility was partly restored in early 1946, when a commercial Lira rate was quoted again. Several depreciation steps followed until September 1949, when the Lira got pegged to the US Dollar. The rate was now at about 3% of the pre-war value, and the peg remained stable for the next three decades. In early 1973, the Lira was floated and depreciated by about 50% until the mid-1980s. Italy then joined the European currency system which led to a stabilization of the Lira. It is a founding member of the European Monetary Union and has introduced the European Euro in 1999. The Italian banknotes and coins were withdrawn in 2002.

Italy joined the International Monetary Fund (IMF) on 27.03.1947.

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