British interest rate hikes raised the cost of Italy’s war debts

Evidence

It is worth noting that monetary austerity in Britain could aff ect the amount of the Italian loan. On June 16, 1920, the Italian chargé d’aff aires, Gabriele Preziosi, wrote in a preoccupied tone to Chancellor Neville Chamberlain: “When the agreement of 8th of August 1919 was negotiated the bank rate had kept steady for a long time at 5 percent. Aft erwards it rose to 6 percent and recently to 7 percent, causing a considerably larger increase of the debt of the Italian Treasury” (T 160/10/12, fol. 3). Th e British government consented to fi x a uniform rate at 5 percent interest for all renewals of Italian bills. — Clara E. Mattei, The Capital Order, 1720

Categorization

• XREF: Direct parallel to how global interest-rate cycles (e.g. Fed tightening) periodically raise debt-service burdens on borrowing countries today — the monetary transmission chain from core to periphery.