The free movement of capital

Objectives

§ Removing all restrictions on capital movements between Member States, then between Member States and third countries (in the latter case with the option of safeguard measures in exceptional circumstances).

§ Liberalisation should help to establish the single market by encouraging other freedoms (the movement of persons, goods and services).

§ It should also encourage economic progress by enabling capital to be invested efficiently.

The first Community measureswere limited in scope.

A 1960 Directive amended in 1962 unconditionally liberalised

§ direct investment;

§ short- or medium-term lending for commercial transactions;

§ purchases of securities dealt in on the stock exchange.

It was not until the single market was launched, almost 20 years later, that the progress begun in 1960-62 was resumed. Two directives, in 1985 and 1986, extended unconditional liberalisation to

§ long-term lending for commercial transactions;

§ purchases of securities not dealt in on the stock exchange.

§ - Liberalisation was completed by Directive 88/361 of 24 June 1988 ^[1], which scrapped all remaining restrictions on capital movements between residents of the Member States on 1 July 1990. As a result, liberalisation was extended to monetary or quasi-monetary transactions, which were likely to have the greatest impact on national monetary policies, such as loans, foreign currency deposits or security transactions.

§ - The directive did include a safeguard clause enabling Member States to take protective measures when short-term capital movements of exceptional size seriously disrupted the conduct of monetary policy. But such measures only applied to restrictively identified transactions and could not last for more than six months.

§ - It also allowed some countries to maintain permanent restrictions, mainly on short-term movements, but only for a specific period: Ireland, Portugal and Spain until 31 December 1992, and Greece until 30 June 1994.

The articles are Principles of the common internal market, Lisbon strategy, EU internal commercial policy are considered in Reference Book on the European Union (Donetsk: DONNUET, 2010).