20 Lire – Italy

In 1902, Italy's currency situation was defined by its adherence to the Latin Monetary Union (LMU), a pan-European agreement it had helped found in 1865. The country was officially on a bimetallic standard (gold and silver), but in practice, the lira was pegged to gold. This system aimed to stabilize exchange rates and facilitate trade with member nations like France, Belgium, and Switzerland. However, Italy's participation was fraught with difficulty, as persistent government budget deficits and a large public debt undermined international confidence in the lira.

The nation's finances were under significant strain. Years of heavy spending, including ambitious public works and military expansion, had led to chronic inflation and a suspension of gold convertibility for banknotes in 1866. While convertibility had been nominally restored, Italy's central bank, the Banca d'Italia, often struggled to maintain sufficient gold reserves. This resulted in a circulation of paper currency that was not fully backed by gold, creating a divergence between Italy's "paper lira" and the stronger "gold-based" currencies of its LMU partners. Consequently, Italian coinage often flowed out to other Union countries where it was melted down for its metal value, causing domestic shortages.

By the turn of the century, the situation was precarious but showing signs of managed stability. The government, led by figures like Finance Minister Luigi Luzzatti, was pursuing a policy of "quasi-convertibility" and fiscal austerity to align more solidly with LMU rules. The goal was to defend the lira's external value and fully return to the gold standard, a symbol of financial credibility. Thus, 1902 found Italy in a transitional phase, navigating the tensions between its formal international commitments and its fragile domestic fiscal reality, a balancing act that would continue for years.