European economic review vol:40 issue:3-5 pages:1091-1101
We survey the literature on monetary integration to discover the economic rationale for the Maastricht convergence criteria. We conclude that the nominal convergence criteria (inflation, interest rates, no devaluation) have very little theoretical foundation. A stronger theoretical case can be made for the requirement of prior reduction of the government debt. We also argue that the Maastricht convergence requirements will almost certainly lead to a 'Great Divide' in the European Union. We therefore conclude that less emphasis should be put on prior convergence conditions and more on strengthening the functioning of the future monetary institutions of the Union.