Italy before the 1890s was a place with so much ambition to catch up with the other countries of Western Europe and to live up to the once great empire of Rome. A massive change began in 1890 and seen as an economic miracle for this change and growth of Italy. This released pressure off political parties of coming up with a reform to kick-start this country that seemed unchangeable. The change could have be due to many factors that where minor.This change lead to a thrive for new political powers and increased political instability also widening the north and south due to wealth of the north compared to the south. The prime minister of Italy in 1893 Giovanni Giollitti founded the Bank of Italy. This was a massive factor of the economic change in Italy and allowed Italy to hold better access of long-term credits and the organisation and understanding of the economy in Italy. The state created a state budget. Public spending was cut by Sidney Sonnino of whom was the minister of finance from 1894-96. He also raised taxes on raw materials and by 1899 there was an annual budget surplus, which remained in Italy until 1910. Due to these changes confidence grew in investors as the currency grew and became more reliable. Although the economy was growing politics in Italy was failing and the liberal state began to lose its popularity which open doors for revolutionists to come in to popularity. Gelloti’s strive to stop this only lost him respect.Giolitti was the great conciliator of the Liberal state, he wished to conciliate opposition groups, to reconcile real Italy to legal Italy, but ‘in the long run, his policies did not work.’ Giolitti never resolved the fundamental problem of the Liberal state: that the Liberal elite was never willing to give power. The people were to be ruled not taken seriously, Giolitti like all Liberals ‘had no wish to see fundamental political change, and certainly did not intend to allow the Socialist, of the Radicals, or the Catholics, or the Nationalists.Giolitti is to blame for the collapse of the liberal state for his poor leadership. Giollitti was very good at economic problems but when the economical problems improved Giolitti became less popular as ‘his job was done’ The collapse of the Liberal state lead to people looking to the far left and the right for change.Problems: Italy and its Liberal state between 1896 and 1900 seemed under threat constantly due to the expectations that it could no seem to live up to at the time. Italy suffered a defeat from Abyssinia, which was Italy’s first attempt in showing political power to the other prominent European countries. After the crash in 1893-94 new banking refroms had to be created. This was left up to Giovanni Giolitti of who founded the Bank of Italy. This banking system was significantly more efficient making it possible for Italy to manage its currency. Sidney Sonnino who was the minister of finance 1894-96 also created a balanced budget and cut public spending. This new banking system that Italy created gave way for economic change and Italy and can be seen as an economic mirical. This miracle was technology. Hydroelectric power allowed Italy to become less dependent on importated Coal which also cut spendeture. Hydroeletciral power grew from 50,000 kilowatts in 1898 to one million killowatts in 1914. Electric power also assisted the development of steel production which also grew from 140,000 tons in 1900 to 930,000 tons in 1913. Terni plant became the biggest steel plant in the world to be totally dependent on hydroelectric power. The government’s policies where a massive impact on this surge of change in production. The production of steel and iron gave way for massive transport imporvments with state-owend railways.This new industrial Italy also allowed improvement in the argricultral industry. As before produciont was based on man made where as by 1914 most silk, cotton and wool became mechanized.This change in production although changing Italy economically caused massive political problems, the south and north divide was on the increase with the north ‘looking down upon’ the south causing the politics to be very different with the more upper class citezens and industrial part was in the north and agricultarl and less populated in the south.