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Free movement of capital in the EU



Council Directive 88/361/EEC — the capital liberalisation directive


  • It was designed to give the European Union (EU) single market its full financial dimension.
  • Its purpose was to progressively abolish all restrictions on the free movement of capital between EU countries, implementing Article 67 of the Treaty establishing the European Communities (Article 67 was subsequently repealed).
  • The rules of the directive became obsolete following the entry into force of the new Article 63 of the Treaty on the Functioning of the European Union which ensures the free movement of capital between EU countries as well as between EU countries and non-EU countries.
  • However, as indicated in the case-law of the Court of Justice of the European Union, the nomenclature of capital movements included in its Annex I is still used for the purposes of defining the notion of capital movements.


  • The directive enshrines the principle of full liberalisation of capital movements* between EU countries with effect from 1 July 1990. Transactions representing capital movements are listed in its Annex I.
  • Transitional arrangements were offered for Spain, Greece, Ireland and Portugal, and Portugal and Greece were given the possibility of a further extension of a maximum of 3 years.
  • The directive seeks to abolish the general arrangements for restrictions on movements of capital between persons resident in EU countries.
  • A ‘safeguard clause’ was introduced. Capital movements can impose a very severe strain on foreign-exchange markets, which leads to serious disturbances in the conduct of a country’ s monetary and exchange rate policies. In this case, the European Commission, after consulting the Monetary Committee and the Committee of Governors of the Central Banks, can authorise that country to take protective measures.
  • The protective measures related to the capital movements listed in Annex II of the directive, and must not exceed 6 months.

With effect as of 1 July 1990, the directive repealed:

  • the first directive for the implementation of Article 67 of the Treaty;
  • Council Directive 72/156/EEC on regulating international capital flows and neutralising their undesirable effects on domestic liquidity*.


It applied between 7 July 1988 and 31 December 1999. EU countries had to incorporate it into national law by 1 July 1990. The directive is now replaced by the new Treaty rules on the free movement of capital but is still used for the purposes of defining the notion of capital movements.


For more information, see:


Capital movements: capital transfers between countries carried out by a person, organisation or business. They include direct investments, investments in real estate, operations in securities and in current and deposit accounts, as well as financial loans and credits.

Domestic liquidity: The amount of cash or cash-equivalents (i.e. assets that can be quickly converted into cash) in circulation within a country’s economy.


Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty (OJ L 178, 8.7.1988, pp. 5-18)

last update 16.11.2016