All three government parties collaborated on
the urgent task of post-war reconstruction; unem-
ployment, rampant inflation and shortages of
food created enormous difficulties for the gov-
ernment and people of Italy. Flour was brought
in by the United Nations Relief and Rehabili-
tation Administration (UNRRA), largely financed
by the US. American emergency loans further
emphasised Italy’s dependence on the US.
Reconstruction, it was held, must precede social-
isation. The fascist economic controls over indus-
try were dismantled and private enterprise was
favoured over state-run industry by the orthodox
economists who dominated the treasury. They
had little faith in Keynesian interference in the
economy, after years of a corporate fascist state.
The trade unions won some relief for the workers
against rising prices, but distress remained wide-
spread, even though production picked up and
the yield of the 1946 harvest was better than that
of 1945. As elsewhere in Western Europe, the
hard winter of 1946–7 caused a grave crisis in
Italy. The first two years after the war were a
period of great hardship for the Italian people,
with 1 million unemployed in industry alone. It
was followed by an extraordinary upswing of pro-
duction, which cannot simply be attributed to
Marshall Aid. It was dubbed an economic miracle,
but its foundations had been laid in the hard years
after the war. Confidence in the currency was
restored. The danger of a communist political and
economic takeover receded. De Gasperi under-
lined the waning need for communist and social-
ist support when he excluded those parties from
his new government in the spring of 1947. With
their departure the last vestiges of the wartime
Committee of National Liberation vanished. The
politics of war, of possible revolutionary change,
were over and Italy was returning to a kind of
normality. Thus in little more than two years a
certain political stability had been attained, and
vital issues such as the future control of industry,
the monarch and the role of the Catholic Church
had all been defined.
No former enemy was quite so rapidly forgiven
nor so speedily embraced as a new ally as was Italy.
In February 1947, unlike Germany, Italy secured
a peace treaty. The loss of its colonies appeared a
heavy blow at the time, but later it was to spare
Italy the trauma of decolonisation suffered by the
victors. The Western Allies demanded no repara-
tions, and those paid to the injured victims in the
Balkans and the USSR were kept to a modest
level, funded by grants and loans supplied by the
US. Yet the Italians did not escape entirely
unscathed. Besides losing their colonial territories,
Italy also had to give up Albania and its wartime
Balkan gains. The most bitterly disputed territory
was the province of Venezia Giulia, until 1918
part of the Austro-Hungarian Empire, its port of
Trieste populated predominantly by Italians. Italy
had had little to show for its heavy losses in the
First World War, and its 1918 gains had enormous
emotional significance. But the Yugoslavs, who
had suffered so much from German and Italian
occupation, were in 1954 granted most of the ter-
ritory by the wartime Allies, the Italians regaining
control only of the city of Trieste itself, which was
made a free territory.
Of great economic, as well as national and
emotional, importance was another former Habs-
burg territory, the South Tyrol, its predominantly
German-speaking population antagonised by
Italian rule. The Italians had gained this territory
with the blood of more than 1 million war dead
in the Great War. They would not now lightly
give up the Brenner Pass frontier or the hydro-
electric power they had developed in this region.
The Allies in 1946 rejected Austrian claims, not
to mention the wishes of the majority of the pop-
ulation. The Italians were far from satisfied with
the peace terms. They claimed that, having
changed sides in 1943, they should have been
better treated.
The Russians consented to the peace treaty,
which might appear surprising in the Cold War
climate of 1947. But the treaty also marked the
logical outcome of the Yalta Agreements. The
occupying powers’ decisions were not to be chal-
lenged in the spheres of influence recognised by
the Soviets. In return for agreeing to the Italian
terms, the satellite regimes in Soviet-controlled
Bulgaria, Romania and Hungary received recog-
nition and peace treaties at the same time, as also
did Finland. Their gains and territorial adjust-
ments as allies of Germany were reversed, but the