European Monetary Agreement


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European Monetary Agreement

(EMA), international governmental facility (1958–72) for the settlement of balance of paymentsbalance of payments,
balance between all payments out of a country within a given period and all payments into the country, an outgrowth of the mercantilist theory of balance of trade.
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 accounts between member states. The EMA, which was administered by the Organization for Economic Cooperation and Development (OECD), replaced the European Payments Union. The EMA provided for the convertibility of the currencies of member states; that meant that the currency of one state could be exchanged directly for the currency of any other member state by nonresidents. In view of the facilities available for balance of payments assistance in the International Monetary FundInternational Monetary Fund
(IMF), specialized agency of the United Nations, established in 1945. It was planned at the Bretton Woods Conference (1944), and its headquarters are in Washington, D.C.
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, the OECD announced (1972) that the EMA would be terminated.

European Monetary Agreement

 

an agreement on currency cooperation among the European capitalist member countries of the European Payments Union (EPU). The agreement was concluded Aug. 5, 1955, and went into force after the abolition of the EPU and the introduction of convertibility for the currencies of the majority of its members (December 1958).

The European Monetary Agreement set itself the goal of assisting the development of international economic ties, through expansion of multilateral payments and through liberalization of trade and movement of capital. The agreement stimulated the preferential use of an open currency market for payments between members in place of the mechanism of multilateral clearing payments. The European Fund was set up with a total of 607.5 million settlement units (equated with the dollar in terms of gold content), of which 271.6 million remained after the abolition of the EPU and 335.9 million were subject to dues collection from partici-pants. Management of the European Fund was entrusted to a board of directors, appointed byjthe council of the Organization for Economic Cooperation and Development (OECD). The Bank for International Settlements in Basel is the technical agent for operations of the European Monetary Agreement.

Unlike the EPU, European Monetary Agreement provides for the balance of multilateral payments to be paid in gold or dollars by each country. Credits of the European Fund are allocated by decision of the council of the OECD for periods up to three years and by decision of the board of the European Monetary Agreement for periods up to one year in sums not exceeding $50 million. Indebtedness of countries to the European Fund for credits received during the entire period of the existence of the fund is a little over $100 million. Therefore there has been no need to require dues from participants for replenishing the fund. The role of the European Monetary Agreement in determining the currency policy of member countries is insignificant, since in this capacity it is duplicating the International Monetary Fund.

E. D. ZOLOTARENKO

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