In the afternoon, Umberto discussed financial matters with Minister of Finance Giulio Valcali and Minister of the Treasury Marco Rinaldi.
To carry out reforms, he first needed to understand the country’s true financial condition.
Seeing the solemn expressions on the two men’s faces, Umberto made a lighthearted remark.
“You two, is this your first time serving as senior officials of the national government?
Are you getting used to it?” “Your Highness, the pressure is immense.
It’s nowhere near as relaxed as New Rome City.” Giulio Valcali gave a bitter smile before beginning his report on the country’s finances.
As of October, Italy’s total debt stood at approximately 200 billion lire, of which around 110 billion lire was foreign debt.
This included debts accumulated before, during, and after the First World War, converted according to the October exchange rate.
Of the foreign debt, approximately 2.1 billion US dollars was owed to the United States, 2.4 billion US dollars to Britain, and 700 million US dollars to France.
Domestic debt stood at approximately 93 billion lire, while annual interest payments amounted to around 7.8 billion lire, accounting for 43 percent of the government’s fiscal revenue.
The deterioration of the country’s finances and the obstruction of Facta’s emergency financial bill had caused the lira’s international exchange rate to decline, effectively increasing the burden of foreign debt repayment.
Last year’s fiscal revenue had been approximately 18.1 billion lire, while expenditure had reached around 28.8 billion lire, resulting in a fiscal deficit of 10.7 billion lire.
Simply keeping the government functioning was already difficult, let alone repaying its debts.
Giulio Valcali spread his hands helplessly.
“Your Highness, the government has to spend nearly half its revenue servicing its debts.
There is hardly any money left to support the military, pay salaries, or fund construction.” “Government credit has declined, the currency has depreciated, and the country’s gold reserves are nearly exhausted.
The situation is extremely difficult.” Marco Rinaldi, as Minister of the Treasury, was responsible for treasury funds, national debt, the budget, and government expenditures—essentially managing the government’s purse strings.
The sight of the deficit-ridden treasury gave him an enormous headache.
“Your Highness, before coming here, I thought the job would be easy.
Once I actually examined the accounts, I realized it was hell.” Marco Rinaldi looked as though he wanted to cry but had no tears left.
“Hahaha, it’s not that serious.
We still have a trump card.” Umberto’s accumulation over more than a decade was enough to provide the government with an emergency infusion of capital.
Besides, he might not even need to use it.
There were still international loans.
“Giulio Valcali, what is the estimated fiscal revenue for this year?” “Your Highness, we estimate it will be roughly the same as last year.” Giulio Valcali gave a conservative estimate.
After all, it was already November, so the year’s tax revenue could more or less be calculated.
“That means we still won’t have enough money for investment next year, let alone for redeeming the land.” Umberto had funds both within Italy and abroad, but those were his trump cards and could not be used unless absolutely necessary.
“Yes, Your Highness.
If we want to make investments, our only option is to borrow.
Tax increases take effect very slowly, and the earliest we would see meaningful additional revenue would be next March.” Although Giulio Valcali said this, he did not recommend raising taxes further.
The ordinary people at the bottom of society had already been squeezed nearly dry by the previous Cabinet.
“To redeem the land, we will probably still have to issue government bonds.
The amount required is simply too large.” Umberto nodded.
“Once I finish discussing the land situation with the Minister of Agriculture, your three departments will jointly formulate a land-bond plan.
We must redeem the land at the lowest possible cost.” “In addition, the financial problems cannot wait.
The Ministry of Finance and the Ministry of the Treasury must come up with a plan as soon as possible.
“Every tax increase and every measure against tax evasion must be well-founded, sensible, and reasonable, because all of them will eventually be made public.
“Tax reform is imperative, especially when it comes to large enterprises.
We cannot allow them to keep money they should rightfully be paying to the state, but neither can we reach too deeply into their pockets.” “Tax increases should be combined with tax reductions.
Where taxes are increased in one area, concessions should be made elsewhere.
“For example, after an entrepreneur has paid taxes in full for five consecutive years, we could offer a reduction in the tax rate on dividend income.
“We need to be flexible and use long-term benefits to compensate for short-term growing pains.” “As for reducing government expenditure, that will inevitably affect civil-service benefits, so the Cabinet and local governments at every level must explain the situation clearly.
“Veterans’ benefits and pensions are among our largest mandatory expenditures.
We can initially pay one-third of the amount due while keeping the total entitlement unchanged, merely postponing the remaining payments.
“At the same time, we can introduce welfare measures as compensation, such as free public transportation passes, with the government settling the resulting costs with transportation companies on an annual basis.” “As for the loans, I will arrange them personally.” The new Cabinet had only just been established, and its members were unusually young.
Every faction was waiting for them to make fools of themselves, so Umberto could not afford to be careless.
Seeing that Umberto intended to personally tackle the greatest difficulty, the two men immediately expressed their determination.
“We will formulate the plan as quickly as possible and strive to implement it by the beginning of next year.” Umberto nodded and encouraged them.
“Compared with the officials of the previous Cabinet, you are still young.
You need to produce results for everyone to see.
Otherwise, I will have no choice but to invite those old fellows back.” “Rest assured, Your Highness.
We did well in New Rome, and we can do well here too.” Their abilities were certainly not poor.
While working in New Rome, besides managing municipal finances, they had also overseen the finances of more than a hundred enterprises and research institutes.
Although the scale could not compare with managing the finances of an entire country, it was hardly insignificant.
After the two men left, Umberto summoned Foreign Minister Carlo Schanzel to discuss the loan.
After Minister Schanzel sat down and took a sip of water, Umberto finally spoke.
“Minister Schanzel, you are a veteran diplomat.
It is time for you to put your experience and wisdom to use.” Minister Schanzel put down his cup and asked in confusion, “Your Highness, what do you need me to do?” Minister Schanzel had been engaged in diplomatic work for many years and was now fifty-seven years old, approaching retirement age.
However, he remained in excellent health and wanted to continue working.
When the Crown Prince became regent, he had originally expected to be forced into early retirement.
To his surprise, he had been retained in office, leaving him deeply grateful.
He was the only minister affiliated with the old political establishment who had been retained.
Umberto replied seriously, “Secure loans from Britain, France, and the United States.” Minister Schanzel would first test the waters.
If there was an opportunity, the Minister of the Treasury could be sent afterward to conduct formal negotiations.
Hearing the word “loans,” Minister Schanzel frowned.
“Your Highness, I’m afraid it will be extremely difficult.” “I know, but I want you to try.” Umberto smiled.
“Previously, the country was in turmoil and the Cabinet was unstable, so foreign governments and financial institutions were unwilling to lend us money.
“Now that I am acting as regent and am prepared to push forward with reforms, we can demonstrate that Italy will eventually be capable of resolving its enormous debt problem.
“The key is to make them understand that we are not borrowing new money merely to repay old debts.
The loans will be used for domestic reform and investment.” “However, I previously…” Minister Schanzel wanted to say that he had already tried before and that it had been useless.
But when the words reached his lips, he swallowed them.
“I will go and try.” Perhaps the Crown Prince was right.
The situation had changed.
As a longtime member of the Cabinet, he understood Italy’s financial predicament better than most.
As long as there was even a sliver of hope, he could not give up.
Umberto nodded with satisfaction.
“There will be quite a bit of traveling involved.
Minister Schanzel, take care of your health and bring several people with you to help share the workload.” Umberto had not appointed a deputy minister under Minister Schanzel, partly because he trusted him and partly because there was no suitable candidate.
The experimental zone had cultivated quite a few diplomatic talents, but even the most promising among them had only reached the level of ambassadors posted abroad.
They had not yet developed the experience necessary to manage diplomacy at the highest international level.
What Umberto worried about most was Minister Schanzel collapsing from exhaustion.
“Rest assured, Your Highness.
I’m still in excellent health.
A few business trips will not be a problem.” Minister Schanzel had no personal friendship with Umberto, but ever since Umberto had taken control of the Cabinet, he had clearly felt the Crown Prince’s respect and consideration toward him.
Who wouldn’t appreciate such a young man?
“You should still take care of yourself.” Umberto glanced at the clock on the wall and noticed that it was already time for dinner.
“Come on.
Let’s go get something to eat.” The Prime Minister’s Office had its own dining room.
Since Umberto had personally invited him, Minister Schanzel naturally had no reason to refuse.
Besides, it was a good opportunity to deepen his understanding of Umberto.
The two walked out of the conference room one after the other.