The Italian economy and international accounts during the period of neutrality

The financial crisis of August 1914, and the collapse of the system of international payments based on London had a profound impact on Italy's foreign trade. The major Italian commercial banks, the Banca Commerciale and the Credito Italiano, were deeply involved in financing Italy's foreign commerce, but they relied heavily on the London acceptance market. Both banks had branches in London, and most Italian commercial bills on the United States and Latin America were drawn up in sterling and presented for acceptance or rediscount in London. Italian cotton imports plummeted from 208,000 quintals in July 1914 to 94,360 quintals in August, and 67,060 quintals in September. In addition to the crisis in the international financial system, Italian trade suffered from the general climate of uncertainty in the business community. Recovery was underway in key economic sectors by October or November, with war-related contracts coming to Italian businesses from both belligerent camps and from the Italian government. The cotton and wool industries, along with iron and steel, engineering, and of course armaments manufacturing, were the earliest and greatest beneficiaries of the war-related boom. With the British naval blockade of the German North Sea ports, Genoa became an essential artery for German, Austrian, and Swiss imports from overseas. Activity in the port increased rapidly, creating a major congestion problem by February 1915.

But the impact of war on the Italian economy was not unequivocally favorable.