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The official site of Italy's central bank
The second oil shock of 1979-80 again caused prices to rise, but three factors helped foster a process of disinflation and the restructuring of industry. In 1979 the European Monetary System began operating, accompanied by an unaccommodating monetary policy stance, which reinforced the real exchange rate of the lira. In 1981 the Bank of Italy gained full autonomy to decide whether or not to purchase Treasury bills not taken up by brokers at auctions (the so-called "divorce").
Wage moderation was produced by the surge in unemployment and the weakening of wage indexation. Real interest rates returned to positive values.
The drive begun in the second half of the 1970s to enhance the effectiveness of monetary control through market instruments was continued. At last, with the introduction of an efficient auction system for issuing Treasury bills and a functioning interbank deposit market, a true money market came into being. In 1987 the inflation rate reached a low of 4.7 per cent and in 1990 the lira moved into the "narrow band" of the EMS. However, inflation turned up again to 6.5 per cent in 1990, owing among other things to unresolved structural problems. The deficit of the current account of the balance of payments became worrying and investments declined. The rehabilitation of the Italian economy, that is, was still partial and fragile.
The Single European Act in February 1986 laid down the stages of the process for the removal of the remaining trade barriers dividing EU national markets. Six years later, in February 1992, the Treaty of Maastricht was signed, forming the basis for the single currency and the European System of Central Banks. In 1990 the completion of liberalization had brought an end to foreign exchange controls, which had been in place in Italy, in one form or another since 1934. This facilitated the international integration of the Italian economy and the financial system.
In the 1980s the supervision of the Bank of Italy was extended to non-bank intermediaries, albeit only for matters impinging on the stability of the financial system. The Bank began the transition from "structural" supervision (which used powers of authorization to shape the structure of system) to "prudential" supervision, based principally on general rules of conduct. In 1990 three fundamental laws were passed: one on commercial banks and groups (called the "Amato-Carli" law), one on securities business, and one on safeguarding competition. The first established a level playing field for bank operators, specifying the joint stock company as the general model for banking business, laid a basis for the privatization of banks, and regulated credit groups. The second regulated securities intermediaries and stock markets. The third introduced antitrust principles and instruments.
During the same years the Bank of Italy set the objective of improving the integrity and efficiency of payments services. The national clearing system and the transactions on banks' accounts at the Bank of Italy were completely computerized. The screen-based Interbank Deposit Market (Mercato Interbancario dei Depositi - MID) was launched.
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