Italian International Banking, 1900-1950

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EUI WORKING PAPERS

EUROPEAN UNIVERSITY INSTITUTE

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European University Institute 3 0001 0032 8994 1 © The Author(s). European University Institute. Digitised version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.

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WP 9 4 0

EUR

E U R O PE A N U N IV E R SIT Y IN ST IT U T E , F L O R E N C E

DEPARTMENT OF HISTORY AND CIVILIZATION

EU I Working Paper HEC No. 98/7

Italian International Banking,

1900-1950

ROBERTO Dl QUIRICO

e-mail: quirico@datacomm.iue.it

BADIA F IE SO L A N A , SAN D O M EN IC O (FI)

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No part o f this paper may be reproduced in any form without permission o f the author.

European University Institute Badia Fiesolana I - 50016 San Domenico (FI)

Italy © The Author(s). European University Institute. Digitised version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.

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In this paper the events o f the expansion abroad o f the large Italian banks during the period 1 9 0 0-1950 have been reconstructed. This expansion has been analysed using a geographical criterion considering the different regions where Italian banks created branches or affiliated banks between the beginning o f the twentieth century and the outbreak o f the second world war. T hese regions are Central-Eastern Europe, the Mediterranean basin, the United States and Latin America, besides the main international financial markets (London, N ew York, Paris, Switzerland). In each case the peculiarities o f the Italian experience in com parison with other experiences o f international banking expansion have been emphasised.

One o f the main ideas defended in the paper is that the Italian banking expansion abroad in the inter-war years must be connected to the internal industrial strategies o f Italy in that period. In fact w e could distinguish three phases in the expansion o f Italian banks abroad between the end o f the first world war and 1939. During the first phase (1 9 1 8 - 1924) the large banks made great progress in their expansion abroad taking advantage o f the favourable situation o f the early first post-w ar period. In the second phase (1 9 2 5 - 1932) Italian banks improved and reorganised their foreign structure aiming to create tight connections with the N ew York financial market in order to obtain finances for the development o f the greater Italian industrial sectors. During the third phase (1 9 3 3 - 1939) Italian banks abroad lost importance in Italian development plans because they suffered strongly for the international crisis and because o f the foreign and econom ic policy o f the Fascist state.

Som e conclusion can be resumed in the follow in g points:

1. Italian-affiliated banks abroad were able to obtain notable importance only in those countries where the banking structure had to be reconstructed “from the ground up" or where the lack o f credit and banking services was severe. In countries where a strong local banking structure already existed such as Austria, Greece, France, Switzerland and the United States o f America, Italian banks remained marginal.

2. The shortage o f financial resources in Italy posed an insurmountable obstacle to wider banking expansion abroad.

3. During the 1920s three possible functions for the Italian banking network abroad appeared: to sustain the Italian econom ic and political penetration in the nearby regions: to sustain Italian trade with the countries in which they had banking offices; and finally, to collect financial resources in order to sustain industrial development in Italy. O f the three options, the first was abandoned in the early 1920s and the third was only partially feasible, due to the efforts to enter into the American capital market, which was the only market that w as truly capable o f furnishing the means to support the development o f Italian industry. These efforts began to see results in the years 1925-26, but they were later frustrated by the econom ic crisis o f 1929. The second option was successful, at least in Central-Eastern Europe, until the middle 1920s when the quota o f Italian direct exports toward the countries o f that area increased substantially.

4. At the end o f the 1920s the Italian banking network abroad (with the exception o f its London and N ew York branches) was primarily constituted by banks that operated adapting them selves to the local econom ic needs; except when addressing the Italian banks and the subsidiaries in order to obtain support or banking international services. In turn, the Italian banks were able to obtain funds (especially in currency) from the different affiliated banks which allow ed them to manage their currency treasuries.

5. W e must consider the existence o f networks o f branches and foreign affiliated banks each one tied to one o f the Italian larger banks and which competed amongst themselves. This fragmentary nature o f banking activity and interests, deprecated by Italian authorities and already limited by the shortage o f financial resources, made the activities o f Italian banks abroad even less effective.

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ITALIAN INTERNATIONAL BANKING,

1900-1950

International economic historiography has placed much emphasis on the expansion o f English, German and French banks abroad in the nineteenth and twentieth century. A complex network of interests emerged which was driven by both economic and foreign policy factors.* 1 In contrast, until a few years ago the Italian case remained virtually unknown both at home and abroad. In this paper I shall reconstruct the main aspects of the process of the Italian banking system expansion abroad during the first half of the twentieth century. Moreover, I shall compare the Italian case with some specific aspects of the experiences of other countries’ banks.

The experience of the expansion abroad of the Italian larger banks could be analysed from three different perspectives. We could face the matter in a business history perspective and try to understand the reasons for this expansion and the results achieved. Moreover, we could choose an approach based on the Italian economic problems in that period and the role of the banking expansion abroad in the Italian economic development plans. Finally, we could analyse the event from an economic diplomacy perspective and appraise the role assigned to Italian banks abroad in Italian foreign policy. These three different approaches all have a wide theoretical foundation and are relevant topics in the historiographical debate in course in the various fields of contemporary history.

r This paper was presented at the conference of the Economic History Association in Leeds (UK), April 1998. It is a general resume of my Ph D. Thesis defended at the European University Institute in March 1998. 1 plan to write a hook in English on the subject of this paper. I am grateful to professors Franco Bonelli. Gian Carlo Falco, Gerald Feldman, Peter Hertner. Alan S. Milward. Jaime Reis. Priscilla Roberts and to Kathy Fabiani and Fabrizio Bientinesi. I remain the only one responsible for errors and omissions.

1 See Alice Teichova - Philip L. Cottrell (eds.). International business and Central Europe 1918-1939. New York, 1983; Alice Teichova, “Versailles and the expansion of the bank o f England into Central Europe" in Herbert Matis (ed ), The economic development o f Austria since 1870. Cambridge, 1994, pp. 329-350; Alice Teichova, An economic background to Munich: International business and Czechoslovakia 1918- 1938, Cambridge, 1974; Gydrgy Ranky, Economy and foreign policy. The struggle o f the great powers fo r hegemony in the Danube Valley. 1919-1939, New York. 1983; Georges Soutou. “L'impérialisme du pauvre; la politique économique du gouvernement français en Europe Centrale et Orientale de 1918 à 1929". Relations internationales, 7, (1976). pp 219-239; Constantin V. Colocotronis, L'Organisation bancaire des Pays Balkaniques e t les capitaux étrangers, Paris, 1934.

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A large part of the research on multinational banks recently completed, has been formulated in a Business History perspective. Instead, the theme of the relations between banking expansion abroad and imperialistic policies of the European countries has had wide success in the past even if it has been re-proposed often in recent times. For the Italian case particular importance had the work of Webster, who has been among the few to face the problem of Italian economic expansion abroad in an imperialistic perspective connecting it to the Italian internal economic problems. I do not subscribe to a large part of the conclusions drawn by Webster. However, I think that an effective approach to the problem of Italian banking expansion abroad has to consider above all the peculiarities of Italian economic structure and cannot be reduced to an analysis of the firm strategies of the large banks. Nevertheless, it will be necessary to analyse these last determining factors in order to compare the Italian experience with that of other countries.

l . Th ei n i t i a lp h a s e so f It a l i a n i n d u s t r i a lg r o w t h A significant acceleration of Italian industrial growth occurred between the end of the nineteenth century and the beginning of the twentieth century. In particular, it was during the period 1896-1907 that the process of industrialisation assumed notable strength. This period was important because of the concurrent verification of particularly favourable factors. First, Italy’s balance of payments resulted in equilibrium due to Italian emigrants’ remittances and to the income obtained from tourism. This allowed the increased levels of demand for imported manufactured goods and raw materials which were necessary for the industrialisation process to be sustained. Second, the conditions for the financing of Italian industrial development were particularly favourable. Between 1893 and 1905, the Italian government reduced its indebtedness and the issue of railway bonds was stopped.2 These two types of bonds were those which had attracted the largest share of domestic savings during the preceding years. Consequently, when the investment opportunities in funds and railway securities were reduced, Italian investors sought industrial finance opportunities. Moreover, foreign capital played an important role in the creation of industries and infrastructures which required large resources in order to be built. Belgian capital had been used primarily to finance public services firms. French capital served instead to finance the Italian public debt and the construction of railways. The Germans devoted themselves chiefly to the electric sector and adopted the technique of Untemehmergeschafl in order to finance their investments in Italy. This method consists of creating firms (electric plants, electric tram lines, and public illumination firms, for example) to which to sell German electrical materials. These firms were created with capital obtained by Germans at home or abroad using holding companies that sold bonds. Later these holding companies sold the firms to Italian investors. The Germans maintained a small quota of the firms’ capital in order to direct the

2 See Franco Bonelli, "Osservazioni e dati sul finanziamento dell'industria italiana all’inizio dei secolo XX", in Annali della fondazione Luigi Einaudi, 2 (1968) 257-286.

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investors the advantage was two-fold. They bought efficient firms which were already producing profits without assuming the risks associated with start-up firms. Moreover, the Italians were not able to provide the capital with which to start the firms as easily as the Germans, who had access to large amounts of financial resources from the international financial markets. Finally, the capacity of many Italian small and middle-size firms to finance themselves was significant. This left the task of financing the larger firms which could not rely on foreign investments (for example, the iron metallurgy and the ship-building sector) to the larger Italian banks and to the Italian financial market.

During the period 1896-1907, the main characteristics of the Italian banking system and financial market were also delineated.3 4 Following the 1893-94 Italian banking crisis and the crash of the two largest Italian banks, the Società Generale di Credito Mobiliare and the Banca Generale, two new large banks were created with German, Swiss and Austrian capital. These two new banks, named Banca Commerciale Italiana (Comit) and Credito Italiano (Credit), were organised according to the German bank model, and they operated chiefly in favour of the larger industries.5 One of the main problems of the large commercial banks in Italy during this period was the shortage of commercial banking work. The small industries financed themselves or applied to the local banks for credit. The larger industries, in contrast, needed long term capital to invest. Consequently, the larger banks (Banca Commerciale Italiana, Credito Italiano, Banco di Roma and, from 1914, the Banca Italiana di Sconto) were forced to provide funds to the large firms. Until 1907 it was possible to use the Italian Stock Exchange to facilitate these transactions. The larger banks became intermediaries between the firms that issued shares or obligations and the Stock Exchange where these bonds were placed. Moreover, these banks instigated the speculation in order to attract new capital towards the stock market.

The limits of the Italian financial market became evident with the 1907 crisis. The Stock Exchange was overly dependent on speculation and banking support as means to guarantee the capital necessary for Italian industrial development. Moreover, with the nationalisation of the railway network in 1905 the issue of bonds (which were used to finance its modernisation) resumed. As a consequence of the war with Libya in 1912, the balance of state’s budget again became negative and state-issued securities again came into competition with industrial bonds. Finally, with the beginning of the first World War the equilibrium o f Italy’s balance of payments was also placed in danger.

3 See Peter Hertner, Il capitale tedesco in Italia dall'unità alla prima guerra mondiale: banche miste e sviluppo economico italiano Bologna, 1984.

4 Alessandro Polsi. "Financial institutions in nineteenth-century Italy. The rise of a banking system” in Financial History Review, 1996, pp. 117-37.

5 See Peter Hertner. “Foreign capital in the Italian banking sector 1860-1914”, in V.I. Bovykin - Rondo Cameron, International Banking 1870-1914, New York, 1991.

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2 . It a l i a n b a n k i n g e x p a n s i o n a b r o a d d u r i n g t h e p r e-w a r

PERIOD

Up to the beginning of the twentieth century Italy's foreign banking relationships were characterised by international bank co-operation. Thanks to the relationships established with international banks. Italian banks were able to operate with relative ease abroad. Moreover, these foreign banks provided the Italian banks with fundamental services in the main financial markets of the time (London and Paris).

The opportunity for Italian banks to expand abroad came about at the beginning of this century. This occurred for various reasons. Firstly. Italian industrial growth provided both an incentive to undertake operations abroad as well as an alibi for Italian foreign policy’s ambitions of power. In fact, there was a possibility to combine economic and political penetration in various areas of the Mediterranean basin in which Italy hoped to develop a significant political role. This was the case in both Libya and Asiatic Turkey.6 According to Webster it was the need to find new markets for the Italian industrial production that pushed the large banks to initiate their expansion abroad. In truth, as concerns the Italian banking activities in Turkey and the Balkans before the war, it was probably the pressure of the Italian foreign office which pushed Italian banks and entrepreneurs toward those areas. Secondly, for Italy it was necessary to be present in the larger financial markets of that time in order to conduct transactions which were limited to banks with an international structure. In fact, a direct presence in a financial market such as London permitted the larger Italian banks to benefit from the acceptances’ market which operated there. In this way they were able to become a point of reference for the smaller Italian banks that could not afford to operate directly in a market where the larger portion of both the international and Italian trade was financed. Moreover, to operate in a financial market of international importance meant that it was possible to enter into contact with a series of important actors, to obtain an international standing that guaranteed social operations, and to obtain credits in hard currency. Finally, the phenomenon of Italian emigration to America offered the opportunity to financially sustain the economic enterprises created by Italian entrepreneurs in South America and to oversee the remittances that the emigrants sent to their families in Italy. Initially this task was facilitated by local banking establishments created by entrepreneurs who belonged to Italian communities to which such establishments intended to address their services. This was the case of the Banco de Italia y Rio de la Plata, the Banco Popolare Italiano and the Nuevo Banco Italiano established in Argentina during the last 30 years of the 19th century and the Banco Italiano of Lima, established in Peru in 1889 by the Italian community. A similar thing occurred in the United States where, at the end of the century, the Italian-American Bank of San

6 Richard A. Webster, Italy's Industrial imperialism 190H-I915. A Study in Pre- Fascism. University o f California Press, Berkeley, 1975.

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Francisco was created and developed by the banker Amedeo Giannini.7 However it must be remember that many of the banking enterprises that applied to Italian communities in the USA were often limited to certain transactions and that at times emigrants’ deposits or remittances were subtracted. In order to protect the emigrants and to favour the influx of their remittances to Italy, in December 1897 the Minister of the Treasury Luigi Luzzati proposed assigning the task of collecting Italian emigrants’ remittances to the Banco di Napoli. This proposal was officially enacted with the establishment of law n.24 on 1 February 1901. This involved the opening of 2 branches of the Banco di Napoli in New York (1905) and Chicago, as well as the establishment of a series of correspondence relationships with South-American banks.8

The “true” expansion of the Italian banking system abroad began in 1902 with the opening of a Banco di Roma branch in Paris which occurred when the Banco di Roma absorbed a small local bank, the Caisse des Entrepôts, and incorporated it as one o f its own branches.9 This action was probably connected not only with the importance of Paris as a financial market, but also with the possibility for the Banco di Roma (which had strong ecclesiastical ties) to take advantage of the benevolence of the French Catholics in order to obtain deposit and banking work. Between 1904 and 1906 the Banco di Roma opened a branch in Alexandria, Egypt, and in Malta. The Egyptian branch worked on financing the production and trade of cotton. In the case of Malta the religious element again served as an incentive for the bank’s presence. The expansion of the Banco di Roma in Libya began in 1907 with the foundation of a branch in Tripoli. This branch was later joined by eight more agencies in Tripolitania and ten in Cyrenaica. In 1908 the Banco di Roma opened another branch in Egypt, this time in Cairo. In 1910 the Banco di Roma took over the Catalana General de Credit annexing a branch in Barcelona and two agencies in Terragona and Montblanch. Finally, the Banco di Roma opened a branch in Constantinople in 1911.

In 1905 the first initiatives abroad were undertaken by Comit. In fact, in that year Comit assumed control of the Banco Commerciale Italo- Brasiliano of San Paulo. Simultaneously it took part in the foundation of the Banco Commerciale llalo-Tunisina, a firm with a capital of one million French francs of which 56% were in Banco Commerciale Italiana’s hands. This choice was probably due to the Comit interests in the phosphates mining sector in Tunis. Banco Commerciale Italo-Tunisina had liquidated in 1911 and replaced by a new company, the Société Générale de V Afrique du Nord established by Comit in co-operation with the Banque de

7 See Massimo Beber, “Italian Banking in California, 1904-1931”, in Olive Checkland, Shizuya Nishimura, Norio Tamaki, Pacific Banking, 1859-1959, New York, 1994, pp.

114-38.

8 See Luigi De Rosa, Emigranti, capitali e banche (1896-1906), Napoli, 1980. 9 See Luigi De Rosa - Gabriele De Rosa, Storia del Banco di Roma, Roma, 1983-84, vol.I. pp. 166-70. © The Author(s). European University Institute. Digitised version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.

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Paris et des Pays Bas (Paribas) and the Société Generale.'0 In 1909 Comit took control of the Banca della Svizzera Italiana, in Lugano. In 1910 Comit, Paribas, the Société Generale and any other small participants, established the Banque Française et Italienne pour l 'Amérique du Sud (Sudameris). in which it also combined the Banco Commerciale Italo- Brasiliano. The reasons of this co-operation could be found in the failure of the banking expansion in Brazil of the French larger banks until then." These failures induced French banks to revise their expansion strategies in South America. In fact the scarce presence of French citizens in Brazil and the reduced volume of trade between France and Brazil made difficult the survival of a large French bank in Latin America also because the potential customers usually turned to banks of their own nationality. For this reason Comit and Paribas planned to combine French capitals and financial potentialities with the commercial activities of the Italian communities in Brazil to which they also applied in order to obtain deposits and to sell Italian and French governmental bonds. This plan came about with the creation of Sudameris.10 11 12

In 1911, both Comit and Credit independently opened branches in London. And finally, Credit participated in the foundation of the Banque Brésilienne Italo-Belge, a bank with its main office in Antwerp and branches in Brazil, assuming 10% o f its shares. This bank, whose denomination changed in Banque Italo-Belge in 1913. expanded quickly in South America establishing 4 centres in Brazil between 1911 and 1913, to which were added the branches of Montevideo in 1912 and Buenos Aires in 1913. In July 1915 the bank opened a branch in London that, however, operated autonomously through the Credito Italiano branch in London.13

From the information presented up to this point, we can infer that the directives of the large Italian banks' expansion abroad had already been partially delineated before the outbreak of the First World War. The Banco di Roma was interested in enlarging its influence in the Mediterranean basin by operating in those countries (France, Spain, Malta) where the Catholic component could provide financial means and opportunities to secure banking work. It was also interested in penetrating in countries, such as Libya (before Italian conquest in 1912) and Asiatic Turkey, in which there was not a well developed banking system, nor Italian bank branches, as in Egypt. In contrast, Comit focused chiefly on South America. Moreover, there were large expectations with regard to the economic growth potential in the Central-Eastern European countries

10 See Antonio Confalonieri, Banca e industria in Italia dalla crisi del 1907 all'agosto 1914. Milano. 1982. vo l.l. pp. 397; the Historical Archives of the Banca Commerciale Italiana, Milan, (thereafter HABCI) Verbali del Consiglio di Amministrazione (thereafter VCDA), Feb. 28 1910. Mar. 28 1917, Feb. 26 1921.

11 See Frederic Mauro, "Les investissements françaises en Amérique Latine XIX-XX siècles" in Maurice Lévy-Leboyer (ed), La position internationale de la France. Aspects économiques et financiers XIX-XX siècles. Paris. 1977. pp. 193-202.

12 See the Historical Archives of French Ministry of Foreign Affairs (hereafter HAFMFA.). Relations Commerciales, série B. Brésil 56.

13 See Giandomenico Piluso, “Le banche miste in Sud America: organizzazioni, strategie, mercati (1905-1921)" in Archivi e imprese, n. 13, June 1996. pp.36-9.

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because of their proximity to Italy and their lack of infrastructures. In Webster’s view they represented an idea] opportunity for the creation of new markets for Italian industry.14 With regard to South America, it was a region where the business of large Italian banks could find favourable opportunities for banking work, thanks to the communities of Italian emigrants and to the scarcity of large local banks which were able to supply certain banking services. The strategy of Credit was not much different. To the three large Italian banks already discussed a fourth was added, the Banco llaliana di Sconto. This bank pursued a policy of expansion abroad that was coherent with the requirements and plans of the Perrone brothers, managers of the Ansaldo’s group with which the bank was linked.

3 . Th e Fir s t Wo r l d Wa ra n dt h ec r i s i so e It a l i a n

ECONOMIC EQUILIBRIUM

During the war the fragility of the equilibrium upon which Italian industrial development was based emerged. Prior to the war, Italy imported raw materials, machinery, and food (particularly wheat). This made Italy’s trade balance with many industrialised countries and exporters of raw materials negative. Italian exports were instead concentrated in large part on particular agricultural products and on manufactured goods both non essential for the economies of the importing countries. Moreover, much of Italy’s foreign trade employed foreign ships, whose use required payments abroad. The process of Italian industrialisation necessitated the importation of machinery and raw materials and therefore made the deficit of Italy’s trade balance structural. Before the war. emigrants’ remittances and the income generated by Italy’s tourist industry enabled the payment of the import surpluses. This also served to avoid currency problems, because such revenues were primarily in hard currencies. With the beginning of the war, these revenues were greatly reduced. Italian exports were also reduced because they were (to a large extent) replaceable or non-essential. Consequently, Italy needed to join one of the two battling forces in order to maintain its industrial structure and status. It chose that which could assure its access to raw materials, transport and - most importantly - the financial resources with which Italy would be able to finance a large volume of war imports.

14_{Webster. Italy's Industrial Imperialism.}

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Between 1914 and 1921 Italy's foreign trade balance worsened dramatically. As a result the credits of the allies became the main compensatory means by which the country was able to settle its trade deficit.

Table 1. Various aspects of Italy’s balance of payments, 1914-1921 (in millions of lire)

Year Trade Balance Emigrants' remittances Allied loans

1914 -728 543 1915 -2.192 489 1.270 1916 -5.337 322 2.900 1917 -10.714 497 8.228 1918 -12.734 482 9.036 1919 -10.619 1.502 6.065 1920 -15.194 24 3 3 568 1921 -8.871 2.098 Note

1. Includes remittances from Italy to foreign countries

SOURCE: Gian Carlo Falco. "La bilancia dei pagamenti italiana tra la prima guerra mondiale e il 1931", in Ricerche p e r la sroria della Banca d'ltalia, vol. VI. Bari Laterza, 1995, pp. 77 e 122.

The war-financing experience greatly affected Italy’s approach to economic management, emphasising the impossibility of pursuing the industrialisation process without submitting to significant external conditionings. Moreover, it laid the framework for the development of Italy’s post-war economic strategies. In Italian politicians and industrialist view, three kinds of needs emerged. First, it resulted critical to obtain the control of raw materials sources. This factor had particular meaning for countries like Italy, which were deprived of the raw materials necessary to their industrial systems. Up to that point, Italy had accommodated such limits via its participation in a multilateral trading system. With the onset of the war, the dependence of Italy on foreign suppliers exacerbated its economic and political marginality and stressed how this marginality had the potential to compromise its industrial growth. Second, it was critical for the Italian economy to be able to count on state intervention in periods of crisis. State intervention with the aim of supporting the Italian economy had developed prior to, during, and after the war, and it had become evident that state action was essential when private initiative and the general economic system, were not able to effectively treat complex economic problems. Finally, the war experience showed that Italy’s relative independence from foreign financial markets in the decade preceding the onset of the war was due to particular circumstances and was not a structural characteristic of the Italian economy. In the last part of the nineteenth century Italian economic development had depended on its connections with the financial markets of Paris and Berlin. Now it was necessary to find a new financial market from which Italy could obtain resources in order to continue the war effort and sustain its industrial development in the post-war period. During the war, it became evident that the only choice for this new financial market was New York. In fact, American aid was essential to finance the allies’ purchases, and one of the

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fundamental problems during the final period of the war was the maintenance of a stable exchange rate between the pound and the dollar, given that the dollar was the primary currency used for the payment of the allies’ commodities imports.15

With the end of the war, the problem of which strategies to adopt in order to maintain Italy’s industrial development arose. Italian diplomats and leaders of the steel industry emphasised the need of reducing Italy’s economic dependence on foreign countries and promoted a policy of economic penetration in the Balkans, the Danubian area and the Mediterranean basin in order to create an economically self-sufficient area for Italy. This plan would have allowed the industrial groups strengthened by the war (such as iron industrialists) to make the transition to peace-time production without suffering large losses while continuing to be able to count on government orders. Creating a sort of “lira zone” would have allowed Italy to reduce the amount of dollars and pounds necessary to pay for the imports. Everything would have been exchanged inside that area (i.e. foreign raw materials and wheat for Italian manufactured goods) and the commercial Italian fleet, enlarged and updated at the expense of the state, would have transported the goods.16 This strategy had also been inspired by the problem of hard currency availability, a problem that had become crucial for the Italian economy in the immediate post-war period and that had played a significant role in the continual depreciation of the lira. A problem such as this was not present during the pre-war period because the balance of payments was in equilibrium due to compensatory revenues (such as emigrants’ remittances) and the fact that Italy’s export were paid in convertible currencies. In contrast, during the early post-war period Italy needed hard currencies but was not able to obtain sufficient quantities of them because the markets where it had the greatest potential to export were also those countries with depreciated currencies.

Banking expansion abroad had a crucial role in these plans. In fact, it was necessary to establish Italian banks in those countries where Italians wanted to penetrate economically in order to sustain trade with Italy and tie the economies of those countries to the Italian one. Moreover, these banks were to finance the local enterprises of Italian entrepreneurs. These plans also found the support of the Italian Ministry of Foreign Affairs that was interested in extending the Italian political influence in the new countries formed after the collapse of the Austro-Hungarian and Ottoman empires.

Other industrial sectors, for example the electric one, were not very interested in a policy of economic expansion abroad. They were interested primarily in the internal development of the country but needed huge finances. They were looking for closer contacts with the American financial world, contacts that could happen only through the intermediation of the

15 See Giancarlo Falco, L'Italia e la politica finanziaria degli alleati 1914-1920. Pisa, 1983

16 See Vilfredo Pareto - Pio Perrone, Il problema dei cambi e l'industria nazionale, Roma, 1920. p. 19. © The Author(s). European University Institute. Digitised version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.

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larger Italian banks, traditionally interested in the development of the electric industry in Italy.

In turn, the larger Italian banks had to reconcile the needs of their customers with their own. Besides working about the needs of the iron and electrical industries, the large banks were now also obliged to plan their expansion abroad in accordance with the new opportunities that had risen with the end of the war and with the strategies of expansion abroad already undertaken before 1914. A process of banking expansion abroad that tried to satisfy all these needs resulted.

4 . It a l i a n b a n k s i n Ce n t r a l- Ea s t e r n Eu r o p e With the end of the first world war and the disintegration of the Austro-Hungarian empire, banks of the winning powers (including Italy) were posed with an opportunity to penetrate the Central-Eastern European markets. Already in the pre-war period, Balkan-Danubian Europe represented for the most industrialised European countries the ideal region where they could exchange their industrial products with raw materials and food stuffs. Such exchanges structure favoured a strong economic integration with Germany and also between the regions of the Austro- Hungarian empire that constituted a political and economically integrated entity. With World War I, the dismemberment of the Austro-Hungarian empire and the rising of the so-called "successor states", new political- economic entities needed to redirect their economies according to the new territorial situation that had been created.

During the early first post-war period, France, Great Britain and Italy tried to take advantage of this situation in order to create an European equilibrium favourable to their foreign policy aims. They initiated policies of economic and financial penetration in Central-Eastern Europe in order to create economic links strong enough to guarantee a political influence in those countries. There was the diffused conviction that the whole Central- Eastern Europe and Turkey were areas where expectations of industrialisation (and therefore demands of infrastructures) could be reconciled with the financing of local industry and the exploitation of raw materials there available. These expectations had an economic but also political base. In fact, economic interests were to be taken into consideration along with the political initiatives in order to make the latter more effective. Moreover, those countries that had won the war were convinced to be able to exploit the victory acquiring the control of an entire sphere of business activities previously of German or Austrian competence. Businessmen and foreign offices of the winning powers were sure to exploit the victory combining economic and political interests by means of the economic penetration in Central-Eastern Europe and Turkey. This would have allowed them to create areas of economic influence dominated by the different winning powers. This necessity was particularly felt by the Italians and French who had discovered during the war a series of problems connected to their dependence on the foreign countries for raw materials. The creation of an economic influence area from which to

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obtain raw materials in exchange of industrial products would have allowed then to resolve simultaneously the problem of the raw materials and food supplies and to find new markets for the national industrial production. This would have meant a reduction of the national economic dependence on the other powers that was a fundamental element in the international relationships of an industrialised country during the war. Obviously, the proximity of these areas of influence would have made more effective this kind of economic integration.

There were also international policy reasons that urged the undertaking of an active policy of penetration in Central-Eastern Europe. France was interested in creating an international front in order to hold back Germany and contrast Soviet Russia. To penetrate economically in Central-Eastern Europe meant to give an economic foundation to the political and military alliances on which the Little Entente was based. Great Britain aimed to restrict the French continental supremacy and tried to prevent Germany from regaining the economic control of Central-Eastern Europe that would have strengthened German economic competitiveness. Finally, Italy was aware of the precariousness of the European equilibrium in the early post-war period. It perceived the disproportion between its international political weight acquired with the military victory and its real potentiality and tried to exploit the propitious moment in order to strengthen and consolidate as much as possible its position as European superpower.17

The history of the Italian economic expansion in Central-Eastern Europe was above all the history of the expansion abroad of the large Italian banks and of the industrial and commercial activities that they undertook or supported. This is not entirely imputable to the banks’ predominance in Italian economic life. Also the impossibility (and sometimes the unwillingness) to intervene of the other point of reference of the Italian economy, the State, contributed to define the Italian strategies of economic penetration. The Italian banking expansion in Central-Eastern Europe was in part different from the French and English model. The latter had begun its expansion already in the pre-war period and they could rely on a series of very tighter contacts with local large banks. After the victory they exploited these contacts in order to conquer new positions. French and English banks become allied with Austrian banks at loss of the German ones. Italian banks tried to do something similar but, could not rely on large financial resources and neither on positions conquered in the pre-war period, they were compelled to make alliances with small banks or to create new banks in countries in which the local banking system was underdeveloped like in Romania and Bulgaria. In any case, the Italians tightened alliances with German banks or groups. The Germans thought about looking on to thé Italians, that among the winners were those financially weaker, in order to maintain the control of their economic activity in various areas. The Italians perceived instead in this union a good

17 See Ennio Di Nolto, Storia delle relazioni intemazionali 1918-1992, Bari, 1995, p. 163. © The Author(s). European University Institute. Digitised version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.

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opportunity to penetrate in Central-Eastern Europe. This kind of alliance did not have much success probably because of Germany’s difficult situation in the early 1920’s and Italy's financial weaknesses. At the same time Italian banks' alliances with local entrepreneurs and financiers made possible the establishment of a network of Italian affiliated banks in Central-Eastern Europe during the first years of the post-war period.

The Banca Italiana di Sconto founded a bank in the Caucasus in 1919, the Banca Italo-Caucasica di Sconto, which had offices in Tiflis, Baku and Batoum. It also created the Banca Dalmata di Sconto in Yugoslavia. The Banca Italiana di Sconto had not sufficient time for a systematic penetration in the successor states because of the crisis that pushed it into bankruptcy in 1921. The Banca Dalmata di Sconto was saved, thanks to the intervention of the Consorzio Sovvenzioni su Valori Industriali (Consortium Subsidies on Industrial Values) which operated on behalf of the Bank of Italy. At the same time the Banca Nazionale di Credito tried to save the Banca Italo-Caucasica di Sconto with the aim of safeguarding the coal concessions obtained by the bank. In the end, however, the Banca Italo-Caucasica di Sconto was liquidated.18 The Banco di Roma planned to take an interest in the area: however, such plans were not pursued. Among the smaller Italian banks only the Banca Commerciale Triestina was present in Central-Eastern Europe at this time. It was linked with the Wiener Lombard und Escompte Bank of Vienna, the Kroatisch Slavonische Landes Hypotheken Bank of Zagreb and the Ungarische Allgemeine Sparcassa A.G. of Budapest. The Credito Italiano tried to extend its banking structure in Central-Eastern Europe through its association with the Banque Generale de Roumanie in Bucharest. Moreover, Credit founded the Banca di Credito Italo-Viennese of Vienna and the Tiroler Hauptbank of Innsbruck.19 These efforts did not produce the expected results, and Credit's shares of the Banque Generale de Roumanie, were liquidated in 1921.20 In contrast, Comit was able to create a stable network of banks in Central-Eastern Europe. During 1919 it established both the Banca Commerciale Italiana e Bulgara (Bulcomit)

18 During the first years o f the post-war period the Banca Italiana di Sconto also carried out a project of expansion abroad with the aim of creating an multinational banking structure. In addition to the Banca Italo-Caucasica it opened a branch in Paris in 1917 as well as a branch in Marseilles. In 1917 it also opened three branches in Brazil at Rio, San Paulo and Santos. In 1918 the Banca Italiana di Sconto also acquired shares of the Banco Commerciale Italiano in Buenos Aires. In addition the Banca Italiana di Sconto created branches in Barcelona, Constantinople, and Tunis. It also created the Banca p er l'Africa Orientale with its centre in Massaua With the collapse of the Banca Italiana di Sconto in 1921, its branches and affiliates were transferred to the Banca Nazionale di Credito. In July 1922 the branches in Brazil and Barcelona were closed. The French branches merged in September 1922 to form the Banque Italo-Francaisé de Crédit. The African affiliates became the Banca Coloniale di Credito in October tif the same year. See Historical Archives o f the Credito Italiano (Thereafter HACI), VCtiÀ òf the Banca Naizionale di Credito, 3 Jul. 1922, 23 Sep. 1922, 13 Oct. 1922, 19 Feb. 1922; Anna Falcherò. La Banca Italiana di Sconto 1914-1921. Sette anni di guerra, Milano,

1990, pp. 152-69.

19 See Credito Italiano, lOOanni, Bologna, 1971. 20 See HACI, VCDA , 9 Mar. 1920 and 2 Jul. 1921.

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with its centre in Sofia and the Banca Italiana Orientale in Fiume.21 In 1920 the latter merged with the Banca Vngaro-ltaliana, a bank created earlier that year by Comit. This was done in co-operation with a group of Hungarian partners, and it served to join the Landes Bank branch of Budapest with the Creditinstitut Ungarischer Holzhaendler. Also in 1919 the Società Italiana di Credito established a branch in Vienna. During 1920 and 1921 the Banca Commerciale Italiana e Romena (Romcomit) was created in Bucharest,22 and shares in the Boemische Union Bank of Prague and in the Export Bank of Vienna were acquired. Between 1926 and 1927 Comit participated in the reorganisation of the Bank Handlowy of Warsaw which merged with the Banque des Pays Polonais Réunis, and it strengthened its links with Comit that possessed 10% o f the Bank Handlowy's stock capital.23 During 1928 Comit took over the Hrvatska Banka in Croatia, and the following year it founded the Banca Commerciale Italiana and Greca in Athens.24

Italian banks engaged in Central-Eastern Europe (particularly the Banca Commerciale Italiana) established a tight relationship of co operation with Camillo Castiglioni, chairman of the Allgemeine Depositenbank of Vienna. Camillo Castiglioni had become the bank chairman at the end of the war thanks to the support of the Dresdner Bank. He had planned a very aggressive policy that aimed for the acquisition of important shares in firm that frequently belonged to the sphere of influence of other Austrian large banks like the Creditanstalt

,25

He was successful in creating an industrial "Konzem" for his bank constituted by a hundred firms. The financial support of the Banca Commerciale Italiana and the political support of the Italian Ministry of Foreign Affairs with which Castiglioni was in close contact contributed to his entrepreneurial success.

If we reflect on the Italian experience of economic penetration in Central-Eastern Europe, various strategic lines can be noted from which the promoters of the different initiatives were inspired. One of these strategies was clearly inspired by the English and French penetration pattern and it was based on the co-operation between the Banca Commerciale Italiana and Castiglioni. He abandoned the Depositenbank chairmanship in 1922 and threw itself in a new financial adventure. Following the examples of the French and English that controlled two of the greatest Viennese banks, Castiglioni constituted a syndicate, putting together the Dresdner Bank, Boehmische Union Bank and Banca Italo- Unglierese, affiliate of the Banca Commerciale Italiana. In August 1922 this syndicate obtained control of one of the main Viennese banks, the

21 See HABCI. VCDA. 23 Ocl. 1919 & 30M ar.I920. 22Sce HABCI VCDA , 6 Mar 1920.

23See HABCI. VCDA . 23 Oct. 1926 & 1 Jun. 1927; HABCI, Contabilità, cartella 27. 24 See HABCI VCDA . 26 Jun. 1928 and 28 Dec. 1928.

211 See Eduard Marz. Austrian banking & financial policy. Creditanstalt a t a turning paint 1913-1923, New York, 1984, pp. 358-9.

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Union Bank.26 At the end of 1922 the Union Bank capital increased from 400 to 800 million of crowns. Castiglioni acquired a substantial portion of the new shares aiming to control the Union Bank shares majority and to transform it into an Italian bank with the help of the Italian government.27 The syndicate led by Castiglioni managed approximately 900,000 shares but a concurrent group led by the young Austrian financier Sigmund Bosel, acquired in Germany and Austria a share packet of about 700.000 shares and undertook a battle for control of the bank.28 On March 1, 1923 the Bosel group offered to acquire the 900,000 shares controlled by the Castiglioni syndicate. Inside the syndicate initial cohesion lessened. In fact, the Dresdner Bank decided to accept the offer and sold its shares forcing Castiglioni to abandon the business.29

From the Bosel scaling at the Union Bank, a network of interests and contrasts emerges. It clarifies (at least in part) the reasons of Castiglioni’s interest in the great Viennese bank. In fact, the Union Bank controlled the Veitscher Magnesit Werke. Once was obtained control of the bank and, consequently, also of the mining company, Bosel made an agreement with the Weinmann group that controlled blast-furnaces and coal mines in Upper Silesia. Bosel exchanged Union Bank shares against shares of the Laura Hutte firm in Weinman hand. Moreover, Bosel and Weinmann tried to acquire 40 per cent of the Bismark Hutte shares (also in Upper Silesia) with the explicit aim to make of the Union Bank the financial reference for the local industry and to acquire the control of the coal resources in that region. In this operation Bosel could rely on French support and in a special way on the Schneider-Creusot group (that participated in the Veitscher Magnesit Werke capital) and on the Banque Clarin, that had acquired 200,000 Union Bank shares from Bosel. The Banque Clarin also controlled the Sociétés des Pétroles de Dabrowa. a firm that managed a series of oil firms in Galicia and in which the Union Bank had shares. The plan of control on the Upper Silesia coal resources carried out by Bosel contrasted with the similar plan of the historical ally of Castiglioni. Hugo Stinnes who aimed to control the main resources needed by the Austrian metallurgical industry. The plan conceived by Castiglioni and his Italian and German allies, when they obtained the Union Bank control, had probably been inspired by similar criteria. It was in contrast with the French objectives who looked on therefore with favour (and perhaps inspired) Bosel’s activity.30

Probably Castiglioni and his allies aimed to control the whole of Austria's métallurgie and mechanic industries and perhaps part of that of

26 See Historical Archives of the Italian Ministry o f Foreign Affairs (Thereafter HAIMFA), Archivio del Commercio 1919-23, Austria 28, letter of Legazione d'Italia in Vienna lo Ministero degli Affari Esteri. 21 Aug. 1922.

27 See HAIMFA. Commercio 1919-23. Austria 28. letter o f Legazione d'Italia in Vienna to Schanzer, 4 Sep. 1922.

28 See HAFMFA. sèrie B, Autriche, doss.85.

29 See HAIMFA. Archivio del Commercio 1919-23. Austria 28, letter of Legazione d'Italia in Vienna to Ministero degli Affari Esteri. 10 Mar. 1923.

30 See HAFMFA, sèrie B. Autriche. doss. 85. 20 Aug. 1923 note.

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the successor states. At first glance. Castiglioni's plans seem indefinite and not well co-ordinated. Attempts to create a large auto group merging Daimler, Austro Fiat and probably Puchwerke and BMW,31 the interests in the metallurgical industry symbolised by Alpine Montan Gesellschaft. Schoellerstahlwerke and Feinstahlwerke, the control acquired by the Banco Ccmmerciale Italiana (with or without Castiglioni) in mechanical firms like the Hungarian Slick-Nicholson or the Astra in Romania, and finally the scaling of the Union Bank, could have been parts of an integrated plan of regional economic control or attempts to create a steel group of European dimensions on the model of the initiatives undertaken by the French Schneider-Crousot.32 In fact the different protagonists of this event had converging interests. Castiglioni. with interests in the Austrian mechanical industry would have been the pivotal point of this association. He would try to put together Stinnes, who controlled the coke supplies, with the Banco Commerciale Italiana that had interests in the metallurgical and mechanical industry in Italy and Central-Eastern Europe, and the Dresdner Bank.

The year 1923 represented a turning point in Italian economic penetration in Central-Eastern Europe. With the failure of the Union Bank operation there were no more points of reference for the Italian efforts of penetration in the successor states. Notwithstanding the loss of control of the Union Bank, in 1923 Castiglioni controlled or participated in numerous banking and industrial firms. He controlled the Export und Industrie Bank in Vienna and a series of shares packets in various firm many of which were also tied up to the Banco Commerciale Italiana. In June 1923, however, the Banco Commerciale Italiana decided to give up a portion of these shares and sold it to Castiglioni. This fact constituted a change of strategy by the Banco Commerciale Italiana, probably due to the failure of the Union Bank operation. Nevertheless, it did not mark the end of co operation between Castiglioni and the Banco Commerciale Italiana.

The various affiliated banks in Central-Eastern Europe developed their own business networks with the industries of the countries in which they operated. This allowed them to avoid direct engagements of Italian banks that became, however, indirect engagements every time the affiliated banks required resources that they were not able to provide locally. Among the affiliates in Central-Eastern Europe, the Banco Commerciale Italiana e

31 See Duccio Bigazzi, ‘Esponazione e investimenti esteri: !a FIAT sul mercato mondiale fino al 1940’, in Fiat 1899-1930 storia e documenti, Milano, 1991, pp. 77- 168; Rudolf Notel. ’Moneta, banca e industria nel periodo fra le due guerre in Austria e Ungheria’, in Le istituzioni finanziarie defili anni trenta nell'Europa continentale, edited by Banco di Roma. Bologna. 1982, p. 128.

32 The Union Européenne Industrielle et Financière (UEIF). established in April 1920 by the Banque de l'Union Parisienne and the Schneider-Crousot group, was successful in acquiring the control o f the Skoda, the most important Czechoslovak mechanical industry, and of the Berg-und-HUtten Werksgesellschafi, that was the principal mining and metallurgical company o f the country. To these shares they added some other shares in mining and metallurgical industries and, also in the hanking sector. See C. Ph. Beaud. ’The interests of the Union Européenne in Central Europe’ in Teichova- Cottrell. International Business, pp. 375-397.

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Romena (Romcomit) had the largest volume of business. The first significant business deal in which it participated was a consortium for cereal exportation which was called Sindex. Sindex's activity was probably tied to that of the Società Granaria, a commercial firm involved with wheat export to Italy that Comit had helped to establish in Romania. Over the following years Romcomit focused on supporting the sugar industry, oil companies, and firms associated with the exploitation of forest resources. At the end of the decade. Romcomit undertook the financing of the mining, metallurgical, and textile industries. In 1921 the bank took part in raising capital for the Astra firm (which built train cars), in light of the business that would result from the reorganisation of the Rumanian railway system. In 1926 Romcomit participated in raising capital for the Phoebus firm of Oradea, which was involved with the repair of railway materials and had a contract with the Rumanian state. As a consequence of the increase in Phoebus capital, Romcomit became the firm’s majority shareholder.33

The Banca Commerciale Italiana e Bulgara was considered the main non-governmental bank in Bulgaria. It had branches in Burgas. Plovdid, and Vama. This bank was particularly active in the financing of the tobacco industry and operated in close collaboration with a firm tied to Comit, the Orientabako, as well as with the Karcheff firm which was involved with the purchase and supply of tobacco to the government monopolies.

The Banca Ungaro-ltaliana (Bankunit) was primarily active in the area of land-mortgage credit. In the initial years of its existence the Banca Ungaro-ltaliana acquired significant share holdings in industrial and commercial enterprises with the intention of defending itself from the post war inflation. In 1925 this bank absorbed the Ungarische Agrar und Renten Bank which had the right to act as a source o f land-mortgage credit issuing lands bonds. After merging with Agrar Bankunit maintained its right to issue these bonds, which was one of the most common transaction for Hungarian banks. In 1926, taking advantage of the potential of these mortgage bonds to be absorbed by the American market, Bankunit began to allow mortgage loans. These loans reached their maximum level in 1928 and 1929. Moreover, the concession of mortgage loans to farmers was one of the main fields of activity for Bankunit’s provincial branches and for a series of provincial banks in which Bankunit held a large number of shares.34 31 *

31 See the rentral Archives of Italian Stale. Rome {thereafter CAIS), IRI rossa. 489. 34 ibid. © The Author(s). European University Institute. Digitised version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.

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Table 2. Banca Ungaro-Italiana’ shareholdings in Hungarian provincial banks in 1933

Provincial Bank % o f shares

Pestmegyeyei Abonyi Takarekpenztar 35.93

Giongyòsi Bank rt 20.00

Karczagi Népbank rt. 34,00

Kisvardai Takarékpenztar rt. 9.91

Mezòturi Takarékpenztar 95,18

Paksi Kòzgazdasagi Bank rt. 21.90

Sarospatabki Takarékpenztar rt. 69,29

Szolnoki Mezogazdasagi Takarékpenztar rt. 65.66 Tapioszelei Gazdasagi Bank rt. 50,08 Volkswirtschaftliche Bank. Subotica (Jugoslavia) 44.00 So urce: CA1S, IR1, serie rossa, cart. 489,fase. E, p. 18

The Bank Handlowy of Warsaw acted as the co-ordination centre of Comit’s initiatives in Poland. Poland was the native land o f the head of Comit, Joseph Toeplitz. He maintained close relationships with representatives of the local economic elite. As a result, Comit granted directly a series of credits to firms engaged in various sectors, instead of entrusting all o f them to the care of the Bank Handlowy.35

The Hrvatska Banka in Croatia was taken over during the spring of 1928, more for reasons of foreign policy than out of economic necessity. The fascist government wanted to create an Italian bank in Croatia. This would have allowed the economic sustenance of those social classes (lands owners, impoverished farmers, small industrialists and dealers) that constituted the base of Ante Pavelic’s Croatian separatist movement.36 Given these assumptions and the strained relations between Italy and Yugoslavia, the bank sought to always maintain a high level of liquidity. These constraints did not allow it to take on a particularly important role among the banks that operated in Zagreb. The importance of the Banco Dalmata di Sconlo was even more modest.

The Banco Commerciale Italiana e Greca was established relatively late, and it operated in a country where there was already a strong presence of English and French banks. As a result, it was not able to gain a foothold as a financier of local industry and commerce. This fact explains its comparatively weak presence within the Greek banking system.

Following the bankruptcy of the Depositenbank and the failure of the Union Bank operation, Italian banking activity in Austria was greatly reduced. Credit was present in Austria via the Banco di Credito llalo- Viennese, a small bank which was liquidated in 1929, and the Tiroler Hauplbank, which was established in collaboration with the Deutsche Bank and the Tyrolian government. Comit controlled also the Viennese branch

35 For information on the Comit's interests in Poland, see Zbignew Landau - Jerzy Tomaszewski, “Foreign policy and international business in Poland, 1918-39", in Alice Teichova - Maurice Levy Leboyer - Helga Nussbaum (eds.). Multinational enterprise in historical perspective. Cambridge, 1986. pp. 270-285.

36 See Giampiero Carocci, La politica estera dell'Italia fascista 1925-1928. Bari, 1984, pp. 173-5. © The Author(s). European University Institute. Digitised version produced by the EUI Library in 2020. Available Open Access on Cadmus, European University Institute Research Repository.