5 Lire – Italy

In 1926, Italy's currency situation was defined by the aggressive economic policies of Benito Mussolini's Fascist regime, which sought to project strength and stability after years of postwar turmoil. The central focus was the "Battle for the Lira" (Battaglia della Lira), officially launched in 1927 but prepared for throughout 1926. Mussolini, driven by national prestige and the desire for an exchange rate that reflected fascist power, was determined to revalue and stabilize the lira against the British pound, which had significantly depreciated in the early 1920s due to inflation and economic uncertainty.

This policy was fiercely deflationary. To engineer a higher lira value, the government imposed severe austerity, including drastic cuts to public spending, wages, and prices. The Bank of Italy, under Governor Bonaldo Stringher, worked to tighten the money supply and build gold reserves, often through coercive measures such as requiring Italians to exchange foreign currency and bonds for state-guaranteed securities. These actions squeezed the economy, particularly hurting exporters and industrialists who suddenly found their goods more expensive on the international market, leading to falling profits and rising unemployment.

Consequently, the 1926 currency situation was a period of intense preparation for a politically motivated revaluation, achieved at great economic cost. While Mussolini would famously announce the Quota 90 peg (90 lire to the British pound) in 1927, heralding it as a triumph of fascist will, the groundwork of austerity and monetary contraction in 26 created immediate hardship. The policy succeeded in stabilizing the currency but did so by suppressing domestic demand and setting the stage for longer-term economic vulnerabilities, as the overvalued lira weakened Italy's competitive position just before the global shock of the Great Depression.