Should We Worry About the Fiscal Numerology of Maastricht?

Willem Buiter

No 668, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The paper reviews and evaluates in a non-technical manner the economic and political arguments for and against the two fiscal convergence criteria written into the Treaty of Maastricht and its Protocols. In order to qualify for full membership in Economic and Monetary Union (EMU), net general government borrowing may not exceed 3% of GDP and general government gross debt may not exceed 60% of GDP. The paper concludes that the adoption of these two universal fiscal reference values is arbitrary, without theoretical or practical foundation. It reflects the triumph of central bank (especially Bundesbank) fiscal-political dogma over economic reasoning and common sense. Attempts to meet these fiscal norms would result in unnecessary hardship for a number of countries and a deflationary fiscal stance for the EC as a whole.

Keywords: Convergence; Coordination; EMU; Externalities; Political Economy; Public Debt and Deficits (search for similar items in EconPapers)
JEL-codes: E58 E61 E62 F15 F33 H63 H77 H87 (search for similar items in EconPapers)
Date: 1992-06
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Citations: View citations in EconPapers (10)

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