Capital movements in the European Economic Community

Abstract

While the free movement of goods and the freedom of establishment for workers and enterprises are essential for achieving the objectives of economic integration set out in the Treaty establishing the European Economic Community, they are not by themselves sufficient. The present article analyses the role of capital movements in the economic and financial integration of the European Community. The author first reviews the provisions of the Treaty that concern capital movements. The factors restricting the liberalization of capital movements between Member States are then considered. Finally, the main points and the practical effect of the First Directive on the liberalization of capital movements are analysed. The author concludes that while considerable progress has been made in some Member States, at the present stage there are areas in which further liberalization is desirable and feasible without harmful effects for the countries involved.

JEL: F15, F21, F32, F36