The U. S. Pays Up

The Allied soldiers invading Sicily in July 1943 carried paper money that resembled cigar coupons. On one side was printed "Allied Military Currency," on the other the Four Freedoms (TIME, Aug. 23, 1943). Washington, for the next 15 months, did not even hint who would redeem the $350,000,000 worth of invasion money (pegged rate: 100 lire to a dollar) which the U.S. and Britain subsequently issued in Italy. Said Treasury Secretary Morgenthau cryptically : redemption was a matter for the peace table.

By last week redemption could no longer wait for the peace table. Reporters were unexpectedly called to the White House at 7 p.m. one evening, there handed a Presidential announcement. Said Mr. Roosevelt: the U.S. is immediately redeeming that part of the Italian invasion currency used to pay U.S. troops. It is doing this by setting up in the U.S. a dollar credit for Italy. Italy can spend the credit on food, medicine, industrial machinery, etc. through Leo Crowley's Foreign Economic Administration, the deliveries to be made in any free space on the already heavily loaded Army ships.

The President did not say how much of the currency had been used to pay troops. Knowing Wall Streeters guessed that it might be one-third, or more, of the total (the British have not, as yet, announced any redemption plan for the currency used to pay British troops). But one piece of news was that the Allies have stopped issuing the currency. Enough is now in circulation so that it returns to Italian banks through deposits, then to be re-used by the Allies.

Black Terms. In short, the U.S. had to make good suddenly on its Four Freedoms money. Why? Month ago, the New York Times's Anne O'Hare McCormick wrote: "The money situation [in Italy] is a nightmare. . . . It worries . . . the Allied commissions even more than the shortages of food." Britain's Ministry of Economic Warfare reported: "Italy's financial condition can hardly be described in black enough terms." The black terms: Italy's national debt, now more than 650 billion lire, is still soaring. Bank notes in circulation have doubled since the Allied invasion, now stand at the fantastic high of 260 billion lire. The Allied currency contributed only a small part to this increase, which mainly came from the frantic efforts of the Badoglio-through-Bonomi Governments to keep afloat. With a Government budget of 100 billion lire and revenue of 20 billion, little more than enough to pay the interest on the national debt, the Italians have had to work the printing presses overtime.

One fact seemed clear: the bitter and extended fighting in Italy had forced the U.S. to drop the plan which Secretary Morgenthau once implied would saddle enemy countries with at least part of the cost of invasion. Now, the U.S. may have to pay as it goes, and try to collect at some future peace table.

This file is automatically generated by a robot program, so reader's discretion is required.