In the 1980s Europe made a leap forward towards the liberalization of capital movements. EEC directives were accepted by all member states obliging them to abolish all remaining exchange controls. This common objective of freedom of capital movements has been Consolidated in the Treaty on European Union. Nowadays virtually all restrictions have been lifted. This Stands in striking contrast to the State of affairs only a decade ago, when many countries still operated a tight regime. Although the Treaty of Rome provided for the freedom of capital movements, this objective was circumscribed by the clause that such liberalization should only be carried through to the extent necessary to ensure the proper functioning of the Common Market. In practice, for a long time trade liberalization took precedence over capital liberalization. It is only since the publication of the White Book on the completion of the Internal Market in 1985 that freedom of capital movements generally has been accepted as a common goal. Apparently there has been a major shift in the appreciation of the pros and cons of free capital flows over time.
KeywordsMember State Monetary Policy Central Bank Monetary Union Capital Control
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