Introduction

Reducing the weight of interest charges on the public debt is an urgent and declared target of many governments in developing countries, but also in developed ones like Italy. The growth of public debt is now almost exclusively due to the inertial requirements of debt service. The structure of public debt today is very different, and its life expectancy much shorter, than used to be the case before the First World War or even in the interwar period. Nevertheless, it might perhaps be instructive to recall to memory a traditional instrument of debt service reduction, conversion. For this purpose this paper analyses the Italian debt conversion operation of 1906, an important episode in pre-1914 Italian financial history. An attempt is made to place it within the context of the international monetary and financial history of the period, and to study the significance of the operation for both the national and international financial markets. As in the case of other large debt conversions of the period, the Italian conversion can be said to have concluded an age, the age of low interest rates, and it came just before the international financial crisis of 1907 really brought the prewar international financial era to a close.

After a paragraph devoted to reminding modern readers of the main features of a conversion, the paper goes on to describe the Italian conversion operation in some detail.