500 Lire (Dante Alighieri) – Italy

In 1965, Italy's currency situation was defined by its participation in the Bretton Woods system, which pegged the Italian lira (ITL) to the US dollar at a fixed exchange rate of 625 lire per dollar. This stability was underpinned by the post-war "Italian economic miracle," a period of rapid industrialization and export-led growth that had strengthened the country's foreign reserves and international credibility. However, this fixed parity was increasingly becoming a straitjacket. Domestically, strong economic growth was fueling wage pressures and inflation, which made Italian exports less competitive and began to erode the balance of payments surplus that had supported the lira's strength.

Beneath the surface of official stability, significant pressures were building. The year was marked by a growing divergence between domestic economic conditions—characterized by rising public spending, strong domestic demand, and creeping inflation—and the requirements of maintaining a rigid external parity. This tension led to recurrent speculative pressures against the lira in foreign exchange markets, as investors questioned the sustainability of the peg. The Bank of Italy was forced to frequently intervene, using its dollar reserves to defend the lira's value, a costly operation that highlighted the currency's underlying vulnerability.

Consequently, 1965 stands as a pivotal year marking the end of the lira's unshakeable post-war stability and the beginning of a period of sustained pressure. The challenges of that year foreshadowed the greater turmoil to come; within a few years, the contradictions would become unmanageable, leading to the "Hot Autumn" of labor unrest in 1969 and ultimately necessitating a devaluation of the lira in the early 1970s as the Bretton Woods system itself collapsed. Thus, 1965 was the calm before the storm, where the institutional framework of a fixed exchange rate still held, but the economic fundamentals were clearly signaling that change was inevitable.