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Should We Worry About the Fiscal Numerology of Maastricht?

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  • Buiter, Willem H

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.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 668.

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Date of creation: Jun 1992
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Handle: RePEc:cpr:ceprdp:668

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Related research

Keywords: Convergence; Coordination; EMU; Externalities; Political Economy; Public Debt and Deficits;

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Cited by:
  1. R. Sean Craig, 1994. "Who will join EMU? Impact of the Maastricht convergence criteria on economic policy choice and performance," International Finance Discussion Papers 480, Board of Governors of the Federal Reserve System (U.S.).
  2. Koren, Stephan & Stiassny, Alfred, 1998. "Tax and Spend, or Spend and Tax? An International Study," Journal of Policy Modeling, Elsevier, vol. 20(2), pages 163-191, April.

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