ABSTRACT
This paper is concerned with fiscal policy in the European Union. At the time of writing, most EU countries are in the process of trying to meet the Maastricht fiscal convergence criteria in order to qualifY for European Monetary Union (EMU). The fiscal criteria (60 per cent of GDP for public debt-to-GDP ratios and 3 per cent of GDP for budget deficits) turned out, in part because of slow European growth, to be much harder to meet than expected. In 1995 and 1996, for example, no EU country (except Luxembourg) met both criteria. And in 1996 OECD projections suggested that no major EU country (not even France or Germany) would, without 'fudges', meet the deficit criterion for 1997, despite serious attempts at 'fiscal consolidation'. Moreover, the 'Stability Pact', demanded by Germany, suggested even tighter criteria on a continuing basis for any countries joining EMU.
