Abstract
n 1992, the member countries of the European Community signed the Maastricht Treaty, which included provisions to harmonize fiscal policies in support of a new common currency, the euro. The signatories were inspired enough to pledge themselves to budgets that were close to balance or in surplus. But following further negotiations that produced the Stability and Growth Pact, the countries' fiscal policies were targeted to two reference values: deficits not to exceed 3 percent of gross domestic product and debts not to exceed 60 percent of gross domestic product. By 1998, the European Union (EU) decided that all but one of the countries interested in joining the European Monetary Union (EMU) had met these targets or had made sufficient progress toward the debt ceiling. By 2000, the median balance of the EMU countries' budgets was in surplus rather than deficit, though much of this result was probably the result of boom-time economic growth.
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