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March 3, 2016, 8:34 p.m. EST

Italians fight to cash in on obsolete lira

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By Giovanni Legorano

A move by Italy to scrape up cash at the height of the eurozone crisis left holders of Italian lira banknotes in the lurch--and has triggered a new uproar in a country still unearthing stashes of the defunct currency.

In late 2011, with the eurozone crisis raging and panic spreading about Italy's solvency, the Italian government found a quick EUR1.2 billion ($1.3 billion) on the books by summarily moving up the deadline for Italians to convert their leftover lire into euros. Overnight and without warning, it pulled back the original deadline--Feb. 28, 2012--by roughly three months, rendering outstanding lira notes worthless.

Forced by a court ruling, Italian authorities said in January that they would offer another chance to exchange the old notes, but only to those who could prove they tried to change their money in those three months before the initial 2012 deadline.

Lira holders, most of them still ineligible, were incensed all over again.

"People call me the Italian Robin Hood now," said Diego Tomasi, one of the relative few who has proof--a complaint that the 67-year-old ski instructor filed after trying to exchange about 20 million lire (EUR10,330, or $11,400) at the start of 2012.

Rather than cash in, he offered in a recent television appearance to change banknotes on behalf of lira holders denied the same opportunity and gave out his cellphone number. He has since received hundreds of calls, he says.

The government's shifting rules, both now and then, have had an outsize impact in a country where cash is king.

For decades, Italians squirreled away banknotes under floorboards, in bottles stored in wine cellars or boxes under beds. Rampant tax evasion as well as a deep mistrust of authority--the government imposed a surprise tax on bank deposits in 1992--have helped make Italy one of Europe's most cash-oriented societies. On average, Italians use cash alternatives such as credit cards or checks for just 75 transactions a year, according to the Bank of Italy, compared with the European Union average of roughly 200 transactions a year.

Italians have discovered these forgotten treasure troves in the most unusual spots in the years since euro notes and coins were introduced in 2002. Often, people concealed the piles of cash, then died without telling anybody about their secret, leaving relatives to find them years later.

Despite the particularly large amount of Italian lire still floating around, Rome set a more limited period--10 years--for euro exchanges than some eurozone countries, such as Spain and the Netherlands. Germany allows the conversion of deutsche marks into euros indefinitely. During that decade, the Bank of Italy exchanged around EUR63 billion worth of lire.

The move advancing the exchange deadline infuriated Italians who suddenly found their lira stashes worthless. In the summer of 2010, for instance, a Croatian client of lawyer Marko Sabatini came to him to ask for guidance on exchanging 5 billion Italian lire--the equivalent of more than EUR2.7 million--he had found behind a false wall in his parents' house.

By late 2011, the man hadn't changed the old lire, figuring he had until February 2012. When the government moved forward the deadline, he instructed Mr. Sabatini to file suit. Other lira holders who were turned away from Bank of Italy branches after the new deadline also sued.

"He felt like banging his head on the wall," Mr. Sabatini said.

Late last year, those plaintiffs got a major boost when Italy's highest court ruled the government's 2011 move unconstitutional. The decision raised the hopes of many who meanwhile had found new lire. One 93-year-old woman from Bologna, for instance, found seven million lire--or EUR3,615--in an envelope tucked in a cupboard drawer of the house she inherited, according to Andrea Lenzi, a financial consultant helping her.

Another client of Mr. Sabatini's found just under 100 million lire under a fake bottom of a wooden chest in a house he bought from his former father-in-law. Mr. Sabatini says his client doesn't want his name to be disclosed for fear his ex-wife may claim part of the loot.

But in January, the government responded to the court decision with its new rules for exchanging lire, dashing the hopes of those with more recently discovered cash. Since then, the Bank of Italy has made 135 lira-euro exchanges worth a total of EUR927,000--a fraction of the EUR1.2 billion worth of lira notes it estimates are still outstanding.

"It's ridiculous," said Giovanni Rossetti, a consultant at consumer group Agitalia, of the government's new rules limiting who is eligible to exchange lire. "Most people didn't even try to exchange the lire at the time, knowing it wasn't allowed."

A spokeswoman for the Ministry of Economy said it is looking at the question of expanding the pool of people entitled to change their lire, though no decision has been made yet.

Some lira holders refuse to give up. Since the court's decision, others have filed suits arguing that the 10-year deadline should be counted from the date on which the person found the lire.

Others are pressing their case in other ways.

Mr. Sabatini's Croatian client could in theory benefit from the new window opened by the government, since the suit he filed in early 2012 should provide proof that he intended to exchange the notes before the original deadline. But he has refused to change the lire or withdraw his lawsuit--pressing instead for the government to offer more possibilities for other lira holders to change their cash.

"We'll go on with our battle in court," said Mr. Sabatini. "I want a judge to set a precedent that could help other people...Not only is this illegal. It's unfair and absurd."

Write to Giovanni Legorano at giovanni.legorano@wsj.com

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