The Treaty of Rome and Capital Movements

Abstract

In the first few years after World War II the attention of policymakers in Europe was focused entirely on reconstruction and rehabilitation. Foreign exchange scarcity, in practice a shortage of US dollars, imposed, however, severe constraints on the pace of economic recovery. Due to a lack of credit-worthiness European governments had no easy access to private funding from US commercial banks. Official assistance from the newly founded Bretton Woods institutions was slow in forthcoming. In these circumstances the US Administration took the initiative to put the necessary financial resources at the disposal of the war-torn European countries in order to revitalize their economies. Behind this Marshall aid was a well thought-out political concept. The European states were asked to design themselves a common recovery plan and thus were forced to get organized and cooperate. To this end the Organisation for European Economic Cooperation (OEEC) was established on 16 April 1948. As a complement to its coordinating functions, the Organization was mandated to pursue the liberalization of trade flows and current payments. Under its aegis the European Payments Union was established in 1950 with a view to gradually restoring external convertibility of the European currencies for the settlement of trade in goods and Services. This goal was achieved at the end of 1958. By that time important Steps had been taken with respect to the dismantlement of trade barriers as well.1 In most countries, however, barriers to non-trade related capital flows remained in place.