Citation

Discussion Paper Details

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Title: Should We Worry About the Fiscal Numerology of Maastricht?

Author(s): Willem H. Buiter

Publication Date: June 1992

Keyword(s): Convergence, Coordination, EMU, Externalities, Political Economy and Public Debt and Deficits

Programme Area(s): International Macroeconomics

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 Reference

Buiter, W. 1992. 'Should We Worry About the Fiscal Numerology of Maastricht?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=668