The European Payments Union (EPU) was an organization in existence from July 1950 to December 1958, when it was replaced by the
European Monetary Agreement.
With the
end of World War II, economic depression struck
Europe
Europe is a continent located entirely in the Northern Hemisphere and mostly in the Eastern Hemisphere. It is bordered by the Arctic Ocean to the north, the Atlantic Ocean to the west, the Mediterranean Sea to the south, and Asia to the east ...
. Of all the non-neutral powers, only the
GDP of the
United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...
had not decreased because of the war,
West Germany
West Germany was the common English name for the Federal Republic of Germany (FRG) from its formation on 23 May 1949 until German reunification, its reunification with East Germany on 3 October 1990. It is sometimes known as the Bonn Republi ...
's GDP was at its 1908 level and
France
France, officially the French Republic, is a country located primarily in Western Europe. Overseas France, Its overseas regions and territories include French Guiana in South America, Saint Pierre and Miquelon in the Atlantic Ocean#North Atlan ...
's at its 1891 level. Trade was based on
US dollar
The United States dollar (symbol: $; currency code: USD) is the official currency of the United States and several other countries. The Coinage Act of 1792 introduced the U.S. dollar at par with the Spanish silver dollar, divided it int ...
reserves (the only acceptable
reserve currency), which Europe lacked. Therefore, the transfer of money (immediately after each transaction) increased the
opportunity cost
In microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives. Assuming the best choice is made, ...
of trading. Some trade was reduced to
barter
In trade, barter (derived from ''bareter'') is a system of exchange (economics), exchange in which participants in a financial transaction, transaction directly exchange good (economics), goods or service (economics), services for other goods ...
. The situation led the
Organisation for European Economic Co-operation
The Organisation for Economic Co-operation and Development (OECD; , OCDE) is an intergovernmental organization with 38 member countries, founded in 1961 to stimulate economic progress and world trade. It is a forum whose member countries ...
(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. It 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 existence. By its close in 1958, convertibility of currency was a possibility, no longer needing government permissions in European countries.
See also
*
European Unit of Account
*
Bretton Woods system
The Bretton Woods system of monetary management established the rules for commercial relations among 44 countries, including the United States, Canada, Western European countries, and Australia, after the 1944 Bretton Woods Agreement until the ...
*
Marshall Plan
The Marshall Plan (officially the European Recovery Program, ERP) was an American initiative enacted in 1948 to provide foreign aid to Western Europe. The United States transferred $13.3 billion (equivalent to $ in ) in economic recovery pr ...
*
Asian Clearing Union
*
European Payments Council
*
European System of Central Banks
The European System of Central Banks (ESCB) is an institution that comprises the European Central Bank (ECB) and the national central banks (NCBs) of all 27 member states of the European Union (EU). Its objective is to ensure price stability ...
*
International Clearing Union
References
* Baldwin, Richard and Charles Wyplosz. ''The Economics of European Integration''. McGraw-Hill, London: 2004.
* Eichengreen, Barry. ''Reconstructing Europe's Trade and Payments The European Payments Union''. Manchester University Press, 1993.
* ''EPU/EMA''. European University Institute
* Kaplan, Jacob J., and Gunther Schleiminger. 1989. ''European Payments Union: Financial Diplomacy in the 1950s''. Oxford: Clarendon Press.
*
Ann Pettifor, Anne Pettifor, Massimo Amato, Luca Fantacci, 2019
How to transform the EU – and build solidarity between its members proposal to learn from previous EPU to improve current Euro. Published online at ''Brave New Europe''.
{{Authority control
History of international trade
International trade organizations
Pan-European trade and professional organizations
Trade blocs
Euro