German & Italian Expansion 1933-1940

Benito Mussolini’ had a “thirst for military glory” Benito Mussolini’ had a “thirst for military glory”. Mussolini believed his destiny was to rule Italy as a modern Caesar and re- create the Roman Empire. Because of these ambitions much of his early domestic policy was centered to consolidating power and to making Italy self-sufficient.

At the beginning of Fascist rule economic policy was classical liberal (capitalist). Several policies were made to attract foreign investment. A 10% tax on investing in the banking and the industry sectors was repealed. Taxes on the directors of some companies were cut in half.

Taxes on foreign capital were exonerated and luxury taxes were repealed. By 1921 Mussolini wanted increase the productivity and self- sufficiency. A series of protective tariffs were levied on foreign imports to lower competition and aid Italian industry. Up until 1925 Italy enjoyed some growth, but the country had also experienced increasing inflation.

The Battle for grain was another policy Mussolini implemented to make Italy more self-sufficient by increasing the production of grains. The Policy offered grants to farmers to buy tractors and fertilizer. It offered the farmers a guaranteed a high prices for their grain. Of course this led to production increasing rapidly.

Imports of grain dropped over 70% between 1925 and 1935 Imports of grain dropped over 70% between 1925 and 1935. This provided Mussolini with fuel for his huge propaganda machine. Although it helped Italy become more self-sufficient it cause a decline in the production of crops such as olives and citrus fruits which were more suitable for land southern Italy and could be exported. With the guaranteed price of grain, the price of bread would rise for everyday Italians.

The Battle for the Lira, the Italian currency at the time, was a policy implemented in the late 1920s. The Lira had been declining in value since the early 1920s. This was actually a positive factor in Italy's economy because it made Italy's exports cheaper and more competitive. Although this helped the economy it was disliked politically.

Mussolini felt that the declining Lira would make Italy look weak to larger powers in Europe and the United States. Mussolini announced on August 18, 1926 in a speech in Pesaro the government would peg the exchange rate 92.46 lira against the British Pound Sterling. By making the Lira stronger it made imports cheaper and benefited heavy industry like steel and chemicals. These industries would provide the basis for an expanded rearmament industry and supported a more active foreign policy.

While Mussolini was consolidating his position in Italy he pursued a peaceful and restrained foreign policy. He signed the Locarno Pacts in 1925 (by which Germany accepted her western frontiers and was admitted into the League of Nations), and the Kellogg- Briand Pact in 1928 (an agreement by which the signatories agreed to outlaw war as a form of foreign policy –an effort at lasting peace following WWI).

Mussolini dismantled almost all constitutional and conventional restraints on his power, in turn building a police state. In 1925 Mussolini's formal title was changed "president of the Council of Ministers" to "head of the government" (although he was still commonly referred to as "Prime Minister") and he was no longer responsible to Parliament and could only be removed by the King. Mussolini had in effect obtained absolute power. Having gained absolute power, Mussolini’s desire to forge a new Roman Empire and for future expansion was inevitable.

Mussolini's ambitions of creating an east African empire would lead to the invasion of Abyssinia(modern day Ethiopia).This would undermine the League of Nations because of the failed Hoare-Laval Plan that followed. The Hoare–Laval Pact(proposed in December 1935) was a proposal by British Foreign Secretary Samuel Hoare and French Prime Minister Pierre Lava to end the war.

Under the pact, Italy would gain parts of Abyssinian and economic influence over all the southern part of Abyssinia. Abyssinia would have a guaranteed corridor to the sea called a "corridor for camels" at the port of Assab. Mussolini was ready to agree to the Pact but it was rejected by opposing parties in Britain and France on moral grounds. The sanctions against Italy were used by Mussolini as a pretext for an alliance with Germany.