European Payments Union
Encyclopedia
The European Payments Union (EPU) was an organization in existence from July 1950, until December 1958, when it was replaced by the European Monetary Agreement
.
With the end of World War II
, economic depression struck Europe
. Of all the non-neutral powers, only the GDP of the United Kingdom
had not decreased because of the war; Germany
's GDP was at its 1908 level and France
's at its 1891 level. Trade was based on US dollar
reserves (the only acceptable reserve currency
), which Europe lacked. Therefore, the transfer of money (immediately after each transaction) increased the opportunity cost
of trading. Some trade was reduced to barter
. This situation led the Organization for European Economic Cooperation (OEEC) to create the EPU, all members signing the agreement on 1 July, 1950. The EPU accounted for trades but did not transfer money until the end of the month. This changed the landscape, from bilateral trades of necessity (trading with partners because of outstanding debts) to multilateral trades. The EPU also forced liberalization by mandating that members eliminate discriminatory trade measures. The EPU was a general success with trade levels more than doubling during its duration. By its close in 1958, convertibility of currency was a possibility—no longer needing government permissions, in European countries.
European Monetary Agreement
The European Monetary Agreement was an agreement signed in Paris on 5 August 1955. Administered by the Organisation for Economic Cooperation and Development, it is the successor of the European Payments Union. It provides a multilateral settlement system. The agreement was terminated by OECD in...
.
With the end of World War II
End of World War II in Europe
The final battles of the European Theatre of World War II as well as the German surrender to the Western Allies and the Soviet Union took place in late April and early May 1945.-Timeline of surrenders and deaths:...
, economic depression struck Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
. Of all the non-neutral powers, only the GDP of the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
had not decreased because of the war; Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
's GDP was at its 1908 level and France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
's at its 1891 level. Trade was based on US dollar
Dollar
The dollar is the name of the official currency of many countries, including Australia, Belize, Canada, Ecuador, El Salvador, Hong Kong, New Zealand, Singapore, Taiwan, and the United States.-Etymology:...
reserves (the only acceptable reserve currency
Reserve currency
A reserve currency, or anchor currency, is a currency that is held in significant quantities by many governments and institutions as part of their foreign exchange reserves...
), which Europe lacked. Therefore, the transfer of money (immediately after each transaction) increased the opportunity cost
Opportunity cost
Opportunity cost is the cost of any activity measured in terms of the value of the best alternative that is not chosen . It is the sacrifice related to the second best choice available to someone, or group, who has picked among several mutually exclusive choices. The opportunity cost is also the...
of trading. Some trade was reduced to barter
Barter
Barter is a method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. It is usually bilateral, but may be multilateral, and usually exists parallel to monetary systems in most developed countries, though to a...
. This situation led the Organization for European Economic Cooperation (OEEC) to create the EPU, all members signing the agreement on 1 July, 1950. The EPU accounted for trades but did not transfer money until the end of the month. This changed the landscape, from bilateral trades of necessity (trading with partners because of outstanding debts) to multilateral trades. The EPU also forced liberalization by mandating that members eliminate discriminatory trade measures. The EPU was a general success with trade levels more than doubling during its duration. By its close in 1958, convertibility of currency was a possibility—no longer needing government permissions, in European countries.
See also
- Asian Clearing UnionAsian Clearing UnionThe Asian Clearing Union , with headquarters in Tehran, Iran, was established on December 9, 1974 at the initiative of the United Nations Economic and Social Commission for Asia and the Pacific...
- European Payments CouncilEuropean Payments CouncilThe European Payments Council was founded in 2002. It calls itself "the decision-making and coordination body of the European banking industry in relation to payments". The main task of the EPC is the development of the Single Euro Payment Area. The 74 members are banks and banking associations....
- European System of Central BanksEuropean System of Central BanksThe European System of Central Banks is composed of the European Central Bank and the national central banks of all 27 European Union Member States.-Functions:...
- International Clearing UnionInternational Clearing UnionThe International Clearing Union was one of the institutions proposed to be set up at the 1944 United Nations Monetary and Financial Conference at Bretton Woods, New Hampshire by British economist John Maynard Keynes...