According to Article 56 of the European Community Treaty of Maastricht, within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited. A vital article that directly affects the lives of millions of European firms and individuals yet needs further elaboration in its development and its current application. During the post World War II era, the IMF's Article's of Agreement (1945) entitled governments with the right to control capital flows. This idea continued to exist until in the early 1980s, then some countries, mainly Japan, the UK, the US and Germany started to diverge and slowly liberalize capital flows across their borders.
[...] Having presented these two sides, I will finally conclude by examining the extent of success of the free movement of capital in Europe. In order to fully understand the benefits associated with the liberalization of capital in Europe, one should note that the free movement of capital in and of itself is indispensable for the success of the three other freedoms. In other words, “there would be little incentive to export goods, for example, were it not possible to repatriate the value of those costs”. [...]
[...] In order to understand this problem, it should be pointed out that the freedom of cross- border investment is definitely part of the notion the capital liberalization. Yet, as a result of the wave of privatization of several enterprises in EU-countries, this has become more and more difficult. Often, these industries carry a national symbol and are therefore referred to as “national icons” or “national champions”. Examples of such national icons would be the energy and telecommunication and airports authority sectors. In an attempt to ‘protect national interests', some EU countries developed restrictive regulatory instruments that wouldn't allow foreign investors to own or control ‘national icons'. [...]
[...] Yet, it was only in 1988 (Directive 88/361/EEC) that EU member states agreed on committing to abolish capital controls by 1992. Although the Treaty of Maastricht did in fact outlaw all restrictions and controls on capital by EU- governments in 1993, it is important to examine the achievements of this trend of capital liberalization on the one hand and its limitations and challenges on the other. In the following, I will be presenting the benefits and achievements of capital liberalization in Europe on the microeconomic (individuals and firms) as well as macroeconomic level. [...]
[...] It is thus obvious, that the problem of “golden shares” clearly constitutes an obstacle to the realization of capital liberalization in Europe. A further rather less technical impediment to free movement of capital in Europe is the lack of policy coordination between EU member states and the lack of balance between monetary and economic policy. To illustrate, Jacque Delors compares it if in the U.S the chairman of the Federal Reserve Board made policy decisions and never talked to with the White House”. [...]
[...] Only then, the economic and monetary union would speak “with one voice” and ensure the success of the free movement of capital. It is undisputable that European countries are one of the first international players who realized that the fragmentation of the financial market constitutes a huge obstacle to the optimization of their performance. In fact, the consolidation of European financial markets has definitely benefited European markets but it has also been essential for this era of globalization. A globalization without Europe's 25 members could hardly be global”. [...]
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