Capital & Exchange Controls For Europe?

It [thedocument] was written by a small cellule of EU officials in 2003 or 2004 (If I remember correctly) under prodding from Paris. It explores the legal basis for measures to stabilise the euro and EMU.

After combing through the EU treaties and court judgments, it concluded that Brussels may impose “quantitative restrictions” on capital inflows. Free movement of capital in the EU is not an “absolute freedom” and could be limited in an emergency.

“Should extremely disturbing capital movements endanger the operation of economic and monetary union, Article 59 EC (Maastricht) provides for the possibility to adopt restrictive measures for a period not exceeding six months,” it says.

It would be renewable every six months. Any decision would be taken by EU finance ministers under qualified majority voting, so no country could veto it.

The document was shown to me by one of the authors at the time. Part of it was later included in a published report, but nobody noticed — except Bernard Connolly, former currency chief at the Commission and later global strategist at Banque AIG. He always suspected that the EU experiment would end in capital controls.

So has the bond crash in southern Europe reached the point where it is “extremely disturbing” and “endangers” monetary union? More ...