European Monetary Union
Reviewing Maastricht

The Maastricht Treaty and its protocols contain a number of convergence criteria that EC member states must satisfy to qualify for full membership of EMU. In Discussion Paper No. 668, Research Fellow Willem Buiter reviews and evaluates the economic and political cases for and against the Maastricht convergence criteria concerning debt and deficits: that net general government borrowing may not exceed 3% of GDP and general government gross debt may not exceed 60% of GDP. He finds these criteria lacking in theoretical or practical foundation and suggests that they reflect the triumph of central bank (especially Bundesbank) fiscal-political dogma over economic reasoning and common sense. Attempts to fulfil these fiscal norms would lead to unnecessary hardship for several countries and an unnecessarily deflationary fiscal stance for the Community as a whole.

Willem Buiter presented this paper at a June lunchtime meeting, reported more fully in this issue of the Bulletin

Should We Worry About the Fiscal Numerology of Maastricht?
Willem H Buiter

Discussion Paper No. 668, June 1992 (IM)