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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.

Suggested Citation

  • Buiter, Willem H., 1992. "Should We Worry About the Fiscal Numerology of Maastricht?," CEPR Discussion Papers 668, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:668
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    Citations

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    Cited by:

    1. Hiemenz, Ulrich (Ed.) & Gundlach, Erich (Ed.), 1994. "Regional integration in Europe and its effects on developing countries," Open Access Publications from Kiel Institute for the World Economy 794, Kiel Institute for the World Economy (IfW Kiel).
    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.
    3. 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.).
    4. repec:hal:spmain:info:hdl:2441/3161 is not listed on IDEAS
    5. Jérôme Creel & Henri Sterdyniak, 1995. "Les déficits publics en Europe," SciencePo Working papers Main hal-03458224, HAL.
    6. repec:hal:spmain:info:hdl:2441/2965 is not listed on IDEAS
    7. Jérôme Creel & Henri Sterdyniak, 1995. "Les déficits publics en Europe. Causes, conséquences ou remèdes à la crise ?," Revue Économique, Programme National Persée, vol. 46(3), pages 645-656.
    8. Neményi, Judit & Halpern, László, 2000. "A konvergencia fiskális feltételei és az Európai Unióhoz való csatlakozás [The fiscal conditions for convergence and accession to the European Union]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 116-135.
    9. Benczes, István, 1999. "Fiskális politika a Gazdasági és Monetáris Unióban [Fiscal policy in the European Economic and Monetary Union]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 362-379.
    10. Stiassny, Alfred & Koren, Stefan, 1994. "Tax and Spend or Spend and Tax? An International Study," Department of Economics Working Paper Series 28, WU Vienna University of Economics and Business.

    More about this item

    Keywords

    Convergence; Coordination; EMU; Externalities; Political Economy; Public Debt and Deficits;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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