GRASSI, PAOLO (Encyclopedia)

Grassi, Paolo (1879-1974), Director General of the Italian Treasury.

1. Grassi was born in Treia (Macerata), the third of five children from a family of landowners. To escape his parents’ will, who had planned an ecclesiastical career for him, he moved to Rome where, in 1904, he won a place at the Ministry of Treasury as a voluntary clerk. The President of the Examining Board, Luigi Venosta, Director General of the Cassa Depositi e Prestiti (Deposits and Loans Department), noticed his abilities and so Grassi carried out his first assignments in this office. In 1906, he graduated in Law at the University of Rome "La Sapienza" and in 1908 he passed an exam for distinguished merit at the Ministry. The President of the Examining Board was Carlo Conti Rossini, an expert of African history and Director General of the Treasury from 1917 to 1925, who became Grassi’s mentor. In 1911, Grassi married Pierina Gigli, who gave him two daughters: Gigliola and Mirella. The aforementioned "exam for distinguished merit" enabled him to get ahead rapidly in his career: he became First Secretary and, in 1912, he was Department Head. Henceforth he performed delicate assignments as an inspector of issuing banks, free banks and exchange banks. In 1913 he was appointed Cavaliere ufficiale of the kingdom. In 1918, after passing an examination by the review board, he was appointed Deputy Inspector for the Supervision of Issuing Banks and Treasury operations and the following year he was made Senior Inspector. At the Turin Printing Works, he bore the main brunt of the office and factory workers’ agitation during the unrest and strikes of 1919 and 1920, by displaying great energy and tact. In the summer of 1921, he carried out a delicate mission in Zara, Dalmatia, where he was responsible for converting currency in the Dalmatian territory annexed by Italy.

2. When the difficult post war period was over, Grassi specialised in bank supervision. He carried out important inspections in the Bank of Italy’s subsidiary branches and in the other two issuing banks, Banco di Sicilia and Banco di Napoli. After being accredited by the latter two banks in September 1922, he wrote detailed reports on the accounts and on the "profits and losses" of the two above-mentioned southern Italian banks. In 1923, he was one of the Supervisors for the report on the Bank of Italy’s accounts. He worked with Finance ministers, first with Alberto De’ Stefani, then with Giuseppe Volpi. He developed a wealth of experience in sectors that were highly technical. From January 1926 to August 1927, he was accredited as Supervisor for Banco di Napoli in the delicate phase when the latter became a commercial bank and lost its right to issue, becoming a monopoly of the Bank of Italy following the Bank Law of 1926. He developed sincere ties of friendship with Giuseppe Frignani, Under-Secretary at the Ministry of Finance in the Volpi’s years and Director General of Banco di Napoli. Grassi performed inspections in the major branches of the Banco di Napoli: Milan, Bari, Ancona, Sassari and Naples. He acted not only as a Supervisor, but took part in the administration. He suspended several decisions and drew attention to the risks in policies regarding the Bank’s portfolio, rates and management of staff.

3. The Volpi Ministry (1925-1928) brought new men to the limelight. Conti Rossini was succeeded as Director General of the Treasury by Luigi Pace, Federico Brofferio and in 1928 by Vincenzo Azzolini. In the same year, Vincenzo Azzolini was appointed Director General of the Bank of Italy. The problem of his successor at the Treasury arose. The position went to Alessandro Ceresa, who did not stay there for long. Conti Rossini supported Grassi’s candidature. In 1928, Minister Antonio Mosconi appointed him Director General. This appointment opened the door to a great number of prestigious Directors’ Boards, including Banca Nazionale del Lavoro then guided by Arturo Osio. The connection with the BNL led to Grassi’s special relations with the Bank in the 1930s. Following his appointment, towards the end of 1928, Grassi published an article entitled Le innovazioni al conto del Tesoro in the journal "Economia". The subject was Minister Mosconi’s reform which Grassi saw as part of the third phase in the Fascist economic policy, after De’ Stefani’s support of production and Volpi’s program for financial stabilization. The reform was described as progress on the path towards transparency and simplification in the process of making public documents concerning the country’s financial situation. 

4. After Bonaldo Stringher’s death in 1930, Grassi was one of the most authoritative candidates for the position of Governor of the Bank of Italy, which went to Vincenzo Azzolini. This was no surprise to an anonymous political commentator of the period, who described Grassi as a man capable of "holding at bay" Azzolini in the event of disputes arising between them since, they asserted, it was from the Treasury that the Bank of Italy could be controlled, and not vice versa. This was one chapter in the drawn-out conflict between the Treasury and the Bank of Italy. Grassi’s early days as a figure capable of taking major decisions coincided with the onset of the great crisis in 1929 which overrun the Italian universal banks. He was involved in the founding of the Istituto mobiliare italiano in 1931 and, together with Guido Jung, in the founding of the Istituto italiano per la ricostruzione industriale (IRI), on whose board he sat and to whose business he lent his talent. However, he was cautious upon the growth of the Beneduce administrative bodies, such as IMI and IRI, outside the sphere of ministerial bureaucracy. From 1935, he tended to take on increasing responsibility and actually took decisions on behalf of the new Finance Minister, Paolo Thaon di Revel. Grassi reached the height of his influence with the IRI-Treasury agreement in December 1936, which, other than his own, carried the signatures of Vincenzo Azzolini, Alberto Beneduce, and Giuseppe Ventura, Treasury Inspector. The agreement was prepared after thorough enquiries had been carried out by Grassi together with Mario Romanelli, Senior Inspector at the Ministry, and the young Pasquale Saraceno of IRI. In particular, it provided for the settlement of the credit and debit relations between IRI, the Treasury and the Bank of Italy. This was a delicate operation carried out to safeguard a significant portion of the country’s industrial wealth with an eye to monetary and financial equilibrium. In other words, it completed the process begun in 1933 with the nationalization of credit through IRI. 

5. Unlike his younger brother, Luigi, a First World War veteran who worked at the head office of the Guardia di Finanza, Grassi did not have Fascist sympathies (he claimed a party membership card of 1921, which was probably backdated). It was his recognised technical ability and his role in balancing the various groups of the Italian managerial class that assured him undisputed high ranking in the administration. In this period, the BNL connection was fundamental for Grassi. Faced with the funding requirements for the war, firstly in Ethiopia and then in Spain, for autarchy, and for public works in Italy and in the colonies, the Roman bank managed to rake up thousands of subscriptions for Treasury Bonds, even among very small investors. Grassi was also involved in foreign economic policy. From 16 June to 9 July 1932, he was a delegate at the reparations conference in Lausanne (June-July 1932). In 1936, Azzolini asked Grassi to solve the problem of the Maria Theresa thaler, because the circulation of this coin in Ethiopia fuelled speculation on the lira. After the conquest of Ethiopia in May 1936, the question – which would then have to be faced in all the other occupied territories during the Second World War – arose as to whether to extend the circulation of the lira or whether to keep the Maria Theresa thaler, an eighteenth-century Austrian currency which, for various reasons, had become the main currency in East Africa from the nineteenth century. In short, after the Italian occupation, the thaler was pegged to a fixed rate of exchange with Italy and the Austrian monopoly ceased legally. Then other countries began to mint thalers with lower production costs than the Italian Mint: they sold thalers at a huge profit, they bought surplus lire and resold them on foreign markets, depressing the rate of exchange. It was decided to put an end to the circulation of two currencies. Grassi was always interested in minting and its history, both in his public and his private life. During his administration, the money minted at the Italian Mint was of a very high technical and artistic quality. Projects and issuing for the territories of the Italian Empire were developed, and "third party" production began, thereby starting an industrial activity that was the pride of the Istituto Poligrafico. The most valuable coins were presented to the King, Victor Emmanuel III, who was perhaps the greatest and most famous numismatist of the time. Under Grassi’s direction, the monumental Relazione della R. Zecca (Rome, 1941) was produced, a volume of more than four hundred pages of great value.

6. After 1940, when Italy went to war, Grassi was responsible for the monetary relationships with the occupied states. This is evident in the notes sent to Grassi by Massimiliano Majnoni d’Intignano (1894-1957), the director of Banca Commerciale’s office in Rome, concerning the banking situation in Greece following the Italo-German occupation, the closure of the English banks and the subsequent space left for the Italian banks, and the deposit of funds for the armed forces with Comit Ellas. The correspondence with Raffaele Mattioli’s Comit, especially with the head office in Rome, was important. The Greek case was not unique, because the aforementioned experience in Zara gave Grassi particular authority in the post-war changeover procedures. There was also Egypt, as it is seen in the diaries of Serafino Mazzolini (1890-1945), an experienced diplomat. Grassi was on the board of directors of the Istituto nazionale cambi con l’estero (National Institute for Overseas Exchange) – created by Francesco Saverio Nitti in 1917 –, together with Vincenzo Azzolini, Alberto Beneduce, Manlio Masi and Alberto D’Agostino who also worked at Comit. The Exchange Institute, which from 1935 was at the service of Felice Guarneri’s Ministry of Commerce and Foreign Currencies, attracted the best economists of the time. Besides, the control of foreign trade and currency was one of the key issues of the 1930s, and one to which the best economists applied themselves. As Grassi’s commitments increased, his prestige grew too. In 1938, he was appointed Cavaliere di Gran Croce (he had been appointed Grande Ufficiale in 1930), one of the many honours he received from the governments of Italy, Spain, Germany, Hungary, Albania, the Vatican and San Marino. Grassi would have liked to become Accountant and Comptroller General, but he never achieved this ambition. 

7. Grassi followed the mechanism known as the "circulation of capital", invented by the German economist Ernst Wagemann. It was a strategy proposed by Thaon di Revel at the time of the war in Ethiopia, according to which, in view of the fact that the government had to finance the war by issuing currency, which involved shifting resources from one sector to another, the inflationary effect is brought down by administrative means such as a price and wage freeze, and surplus liquid assets are reabsorbed by the tax burden and by the placing of government securities. The Treasury had to chase events, and Grassi’s work was under pressure. Until 1942 the circuit allowed the monetary and financial situation to be kept under control, but Grassi’s 1943 report to the Minister of Finance, Giacomo Acerbo, on the situation of the Treasury and the state of currency underlined the enormous effort made to cope with the various demands of recent years. Collapse was imminent.

8. After armistice ofSeptember 8th, 1943, Grassi did not go to the Republic of Salò, in northern Italy. He continued to work at the Ministry until the 4th of October, but on the 1st of November he was pensioned off. Rome was then under the Nazi control. With the liberation of Rome, in June 1944, he returned to the Ministry, but he was pensioned off again on 29 January 1945. As Director General, Grassi was accused of collaborationism with the Germans and charged with some of the responsibility for the Nazis’ theft of the Bank of Italy’s gold: however, there are various different interpretations of the episode. Grassi’s retirement provision was cancelled in 1948. Reinstated, he left the Ministry of the Treasury once and for all on 1 August 1949 because he had reached the upper age limit of seventy. His successor as Director General was his brother-in-law, Giuseppe Ventura, Treasury Inspector. After the second world war, Grassi held numerous appointments which enabled him to have a role in the years of the reconstruction and the economic boom, albeit on a smaller scale: he sat on the Advisory Board and was vice-president of the Istituto nazionale di credito edilizio, Banca Romana and the Hotel and Tourism Department of Banca Nazionale del Lavoro. Grassi was also a member of the Advisory Board of the Italian State Railways, the National Insurance Service, Milani Paper Mills, the Monte Amiata Company and the Consortium for Credit for Agricultural Improvement (Meliorconsorzio). He died in Rome, aged 95.
For further details and sources, see G. Farese, La continuità nell’amministrazione finanziaria. Paolo Grassi al Tesoro 1904-1944, forthcoming on "Storia economica", 2009.
Editor: Giovanni FARESE