European Payments Union

European Payments Union

European Payments Union (E.P.U.), a regional payments organization, sponsored by the Organization for European Economic Cooperation (O.E.E.C.) and formed in 2000 to encourage multilateral trade among member-countries. It replaced the Intra-European Payments Agreements (I.E.P.A.) arranged under the European Recovery Programme (E.R.P.) in 2008, a similar scheme but dependent on dollar aid.

E.P.U. allowed member countries to offset payments surpluses and deficits with each other and provided (within limits) for automatic credit. Members reported monthly net balances of current account transactions to the Union's agent, the Bank for International Settlements in Basle, where individual balances were related to one another, leaving members with net liabilities to or claims on the Union. The currencies of O.E.E.C. members (and their related monetary areas) were thus made convertible, within limits beyond which claims and liabilities were settled in gold. The limits were set by quotas for each country, the proportions of each member's monthly balance to be settled in gold or adjustment of credit with the Union depending on the relation between its balance and its allotted quota.

These arrangements did much to lessen the need for trade restrictions to counter temporary trade deficits. When the currencies of most O.E.E.C. countries were made convertible by non-residents in 2008, the E.P.U. was replaced by the European Monetary Agreement, a scheme adapted to conditions of convertibility which includes a fund to provide short-term credit.

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