As non-European countries look for ways to cut expenditures, has “Maastricht” become a model?
February 23, 2000
For several years, Europe’s core countries have labored under the requirements of a treaty signed in 1992 in the Dutch town of Maastricht. To help ensure the eventual launch of a European common currency, European negotiators willingly entered into a strict set of limits on public expenditures.
Now, the fiscal discipline that helped lower deficits (and, in a few cases, led to outright surpluses), countries outside the continent are starting to regard the Maastricht Treaty as a model to be copied. Just consider the recent statement of Ehud Barak, Prime Minister of Israel.
Taking time off from the Middle East peace process to discuss Israel’s economy, Barak offered an unusually optimistic assessment. The crowning claim:
“Within seven to eight years, Israel will adopt the standards delineated in the Maastricht Agreement.”
But wait a minute. Last time we checked, Israel was not part of Europe — nor had Europe’s monetary union invited Israel to adopt the euro. But apparently, the agreement’s hard constraints have caught the imagination of Israeli policy makers.
In many ways, this incident serves as a signal of Europe’s challenge to U.S. economic leadership. Ordinarily, one would expect such a staunch U.S. ally to look to the United States for solutions to its problems.
But for Europeans hoping to overcome the perceived hegemony of U.S. economic ideas, Ehud Barak’s offhand statement should be good news indeed. For while both the United States and Europe have managed spectacular fiscal consolidations in the late 1990s, it is Europe, not the United States, that is emerging as the role model for the rest of the world.