Proposal for a COUNCIL DIRECTIVE authorizing The Hellenic Republic to defer liberalization of certain capital movements under Article 6(2) of Council Directive 88/361/EEC of 24 June 1988
Date: 1992-12-10
Institutions: European Commission
Subjects: European Monetary System, Greece, capital movement, economic policy, free movement of capital

COMMISSION OF THE EUROPEAN  COMMUNITIES 

C0M(92) 545 final 

Brussels,  10 December  1992 

Proposal  for a 

COUNCIL  DIRECTIVE 

authorizing The Hellenic Republic 
to defer  liberalization of certain capital  movements 
under Article 6(2) of Council  Directive 88/361/EEC of 24 June 1988 

(presented  by the Commission) 

EXPLANATORY  MEMORANDUM 

z 

1. The  Council  Directive  88/361/EEC  of  24  June  1988  which  entered  into 
force  on  1 July  1990, authorized  four  Member  States  -  Greece,  Ireland, 
Spain  and  Portugal  -  to  defer  the  liberalization  of  certain  capital 
transactions until 31.12.1992. 

Moreover,  under  Article  6  paragraph  2  of  the  Directive,  Greece  and 
Portugal  may  request  an  extension  of  the  above  time  limit  if  they 
consider  that  they  are  unable,  because  of  balance  of  payments 
difficulties  or  of  Insufficient  adaptation  of  the  national  financial 
system  to  proceed  with  full  liberalization  before  31.12.1992.  The 
possibility  for  such  an extension, which  cannot  exceed  three years, is 
also covered by Article 73e of  the EMU Treaty. 

2. The  Greek  authorities  requested  on  12.11.92  an  extension  of  the 
transitional  period  for  short-term  capital  operations  until  1.1.1995. 
They  also  propose  to  liberalize  some  of  the  currently  applied 
restrictions  from  1.1.1993. 

According  to  the  authorities  the  maintenance  of  the  restrictions  on 
short-term  capital  movements, for a specified  period,  is necessary  while 
efforts  to  stabilize  the  economy  are  still  underway  and  in  order  to 
support  the monetary  and exchange  rate policies. 

3. The  Commission,  after  having  reviewed,  in  collaboration  with  the 
Monetary  Committee,  the  economic  and  financial  situation  of  Greece, 
considers  that  there  are  grounds  for  granting  an  extension  of  the 
transitional  period : 

although  the balance of payments has  improved  following  progress made 
towards  stabilizing  the  economy,  trHs  improvement  remains  fragile 
taking  account  of 
the  stil!  sizeable  fiscal  imbalances  and  the  high 
InfI at Ion; 

although  liberalization measures  and  reforms  have  been  introduced  in 
4 he area of  financial  markets, key markets  and  Instruments are still 
Insufficiently developed. 

In  view  of  the  above,  the  Commission  proposes  to  the  Council  to  adopt 
the attached Directive authorizing Greece  to defer  the  liberalization of 
certain capital  movements until  30 June 1994. 

Proposal  for a 

COUNCIL DIRECTIVE 
of  .. December  1992 

*- 

J 

authorizing The Hellenic Republic 
to defer  liberalization of certain capital  movements 
under Article 6(2) of Council  Directive 88/361/EEC of 24 June 1988 

THE COUNCIL OF THE EUROPEAN COMMUNITIES 

Having  regard  to  the  Treaty  establishing  the  European  Economic 

Community, and  in particular  Article 69 thereof, 

Having  regard  to  the  Council  Directive  88/361/EEC^1>  issued  for  the 

implementation  of  the  provisions  of  Article  67  of  the  Treaty  and  in 

particular  Article 6(2) thereof, 

Having  regard  to  the  proposal  from  the  Commission  submitted  following 

consultation with  the Monetary  Committee^2^. 

Whereas  under  Article  6(2) of  the  Directive  the  Hellenic  Republic  was 

authorized  to  continue  to apply,  until  31  December  1992, restrictions 

on  the movement  of  capital  laid down  in Annex  IV, Lists  III and  IV, of 

the Directive; whereas  the Article  provides  for  the possibility  for  an 

extension of  this time  limit, not exceeding  three years. 

Whereas  the  Hellenic  Republic  has  applied  a  programme  of  economic 

stabilisation  and  reform;  whereas  It  has  claimed  that  the  process  of 

budgetary  consolidation  has  accelerated  and  it  will  be  strengthened 

with  the  1993  budget;  whereas  despite  the  adjustment  effort  which  is 

underway  solid  expectations  of  monetary  and  exchange  rate  stability 

have  not,  yet,  been  established;  whereas  the  maintenance  of 

restrictions  on  short-term  capital,  for  a  specified  period,  is 

necessary  in order  to ensure  a  smooth  macroeconomic  adjustment  and  to 

support  monetary  and  exchange  rate  policies  after  the  entry  of  the 

Drachma  to the exchange  rate mechanism of  the EMS-, whereas  the Hellenic 

Republic  has  requested  an extension of  the  time  limit  set  for  complete 

liberalization  of  short-term  capital  until  1.1.1995-,  whereas  it 

intends,  however,  to proceed  to  the  liberalization,  from  1.1.1993, of 

some of  the currently  applied  restrictions. 

(1) O.J. No L 178, 8.7.1988, p.5 
(2) 

f 

Whereas  the Commission  has reviewed,  in collaboration with  the Monetary 

Committee,  the  economic  and  financial  developments  in  the  Greek 

economy;  whereas  it  follows  from  this  examination  that  although 

progress  has  been  made  in  the  stabilisation  of  the  economy  and  the 

situation  of  the  balance  of  payments  has  improved,  the  existing 

sizeable  budgetary  imbalances  and  the still  high  inflation  render  this 

improvement  fragile.  Whereas  a  gradual  liberalization  of  short-term 

capital  movements  is  appropriate  before  a  durable  improvement  in  the 

stabilization of  the economy  has been achieved. 

Whereas  reforms  have  been  introduced  and  liberalization  measures  have 

been  taken  by  the  Greek  authorities  in  the  area  of  financial  markets; 

whereas,  however,  the  financial  system  is  not  yet  sufficiently 

developed  to face a situation of complete mobility of capital. 

Whereas  there  are  grounds,  In  view  of  the  above,  for  extending  the 

authorization  to  apply  restrictions  on  the  movement  of  short-term 

capi tal. 

Whereas  however  such  a  derogation  can  in no  way  justify  a  control  of 

capital  movements  under  conditions  contrary  to  Article  8A  of  the 

Treaty. 

HAS ADOPTED THIS DIRECTIVE 

Article 1 

The Hellenic Republic may  temporarily continue to apply  restrictions to 

the capital  movements  listed  in the Annex  to this directive, subject  to 

the conditions and  time  limits  laid down  in that Annex. 

Article 2 

This Directive  is addressed  to the Member  States 

Done at Brussels,  .. December  1992 

For  the CounciI 

The Hellenic Republic may, until  30 June 1994, 
continue  to apply  restrictions on  the following capital  movements 

ANNEX 

Operations  in current  and deposit  accounts with  financial  institutions: 

operations  of  a  duration  of  less  than  one  year  carried  out  by 
residents with  foreign  financial  institutions. 

Financial  loans and credits of a duration of  less than one year 

Personal  capital  movements : 

loans of a duration of  less than one year. 

Physical  import  and export of  financial  assets : 

means of payments. 

G 
ISSN 0254-1475 

COM (92) 545 final 

DOCUMENTS 

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09 

Catalogue number : CB-CO-92-567-EN-C 

ISBN 92-77-50636-9 

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