Italian Lira - History

History

The lira ultimately dates back to Charlemagne. Like the pound sterling, it represented one pound weight of silver, and was equal to 20 soldi or 240 denari. Before unification, many of the Italian states used the lira as their currency.

In 1807, the Napoleonic Kingdom of Italy (occupying the north of the current state) introduced the lira as its currency. Equal to the French franc, it was divided into 20 soldi or 100 centesimi. The lira circulated until 1814 when the kingdom was divided up into smaller states.

Upon the creation of the Kingdom of Italy under Vittorio Emanuele II (1861), a unified lira was established, at 4.5 grams of silver or 290.322 milligrams of gold. This was a direct continuation of the Sardinian lira. Other currencies replaced by the Italian lira included the Lombardy-Venetia pound, the Two Sicilies piastra, the Tuscan fiorino, the Papal States scudo and the Parman lira. In 1865, Italy formed part of the Latin Monetary Union in which the lira was set as equal to, among others, the French, Belgian and Swiss francs: in fact, in various Gallo-Italic dialects in north-western Italy, the lira was outright called "franc". This practice has obviously ended with the introduction of the euro in 2002.

World War I broke the Latin Monetary Union and resulted in prices rising severalfold in Italy. Inflation was curbed somewhat by Mussolini, who, on August 18, 1926, declared that the exchange rate between lira and pound would be £1 = 90 lire—the so-called Quota 90, although the free exchange rate had been closer to 140-150 lire per pound, causing a temporary deflation and widespread problems in the real economy. In 1927, the lira was pegged to the U.S. dollar at a rate of 1 dollar = 19 lire. This rate lasted until 1934, with a separate "tourist" rate of US$1 = 24.89 lire being established in 1936. In 1939, the "official" rate was 19.8 lire.

After the Allied invasion of Italy, an exchange rate was set at US$1 = 120 lire (1 British pound = 480 lire) in June 1943, reduced to 100 lire the following month. In German occupied areas, the exchange rate was set at 1 Reichsmark = 10 lire. After the war, the value of the lira fluctuated, before Italy set a peg of US$1 = 575 lire within the Bretton Woods System in November 1947. Following the devaluation of the pound, Italy devalued to US$1 = 625 lire on 21 September 1949. This rate was maintained until the end of the Bretton Woods System in the early 1970s. Several episodes of high inflation followed until the lira was replaced by the euro.

The lira was the official unit of currency in Italy until January 1, 1999, when it was replaced by the euro (euro coins and notes were not introduced until 2002). Old lira denominated currency ceased to be legal tender on February 28, 2002. The conversion rate is 1,936.27 lire to the euro.

All lira banknotes in use immediately before the introduction of the euro, as all post-World War II coins, were exchanged by the Bank of Italy up to 6 December 2011. Originally Italy's central bank pledged to redeem Italian coins and banknotes until 29 February 2012, but this was brought forward to 6 December 2011.