The term originates from libra, the largest unit of the Carolingian monetary system used in Western Europe and elsewhere from the 8th to the 20th century.

[2] The Carolingian system is the origin of the French livre tournois (predecessor of the franc), the Italian lira, and the pound unit of sterling and related currencies.

These units translate in Italian to lira, soldo and denaro; in French to livre, sou and denier; and in English to pound, shilling and penny.

World War I broke the Latin Monetary Union and resulted in prices rising several fold in Italy.

Inflation was curbed somewhat by Mussolini, who, on 18 August 1926, announced a new exchange rate between the lira and sterling of £1 = Lit 92.46 (the so-called Quota 90) although the free exchange rate had been closer to Lit 140–150 to the pound, causing a temporary deflation and widespread problems in the real economy.

After the war, the value of the lira fluctuated, before Italy set a peg of $1 = Lit 575 within the Bretton Woods System in November 1947.

Due to the lira's low value after the war economic calculations and price displays became unwieldy because of the large number of zeroes.

Ongoing heavy inflation saw the lira pesante pushed back until it was permanently abandoned in 1991 because of plans for a single European currency.

[13] All lira banknotes in use immediately before the introduction of the euro, and all post-World War II coins, were exchanged by the Bank of Italy up to 6 December 2011.

Originally, Italy's central bank pledged to redeem Italian coins and banknotes until 29 February 2012, but this was brought forward to 6 December 2011.

The lira of Parma was introduced by Duchess Marie Louise, Duchess of Parma, who issued coin denominations of 1, 3, 5, 25, 50 cents and 1, 2, 5, 20 and 40 lire,[14] while gold coins of 10, 50, 80 and 100 lire were also minted from the Piedmont-Sardinia lira introduced by Victor Emmanuel I of Savoy.

[15] In 1861, coins were minted in Florence, Milan, Naples and Turin in denominations of c.1, c.2, c.5, c.10 and c.50, 1 lira, 2, 5, 10 and 20 lire, with the lowest four in copper, the highest two in gold and the remainder in silver.

In 1936, the last substantial issue of silver coins was made, whilst, in 1939, moves to reduce the cost of the coinage led to copper being replaced by aluminium bronze and nickel by stainless steel.

Coin production resumed slowly in 1946, reaching 1 million minted in 1948, with the purchasing power of the lira reduced to 2% of its value in 1939.

Increases in the silver bullion price led to the 500 lire coins being produced only in small numbers for collectors after 1967.

Coins still being minted for circulation at the time of the changeover to euro (in 2000 and 2001 only lire for collectors coins sets were minted) were:[17] In 1882, the government began issuing low-denomination paper money bearing the title "Biglietto di Stato" (meaning "Ticket of the state").

The government also issued notes titled "Buono di Cassa" between 1893 and 1922 in denominations of 1 lira and 2 lire.

Production of Biglietti di Stato ceased in 1925 but resumed in 1935 with notes for 1 lira, 2, 5 and 10 lire being introduced by 1939.

These were followed in 1944 by a series of Biglietti di Stato for 1 lira, 2, 5 and 10 lire, which circulated until replaced by coins in the late 1940s.

Technically bearer cheques, they were printed in the form of banknotes and were generally accepted as substitute legal currency.

Italian lira notes and coins were legal tender in the Vatican City, and vice versa.

Specific Sammarinese coins were minted in Rome, and were legal tender in Italy, as well as the Vatican City.

: miniassegno) were a type of notgeld that circulated in Italy in the late 1970s in place of change, as in that period small-denomination coins were scarce and were often substituted with candy, stamps, telephone tokens, or even public transport tickets.