At the national level, many structural and institutional reforms are still needed to safeguard and improve the future functioning of countries’ economies and thereby the euro area as a whole. We should also review the way in which national policies are currently co-ordinated in the EU.
This can result from competitive pressures among financial institutions or because haircut methodologies place more weight on recent benign market movements. Declines in haircut levels increase the ability of market participants to obtain leverage, which in turn can fuel further increases in asset prices.