Therefore, a key lesson learnt from the crisis is that in order to fully reap the benefits of EMU, it is essential to strengthen the rules that govern macroeconomic policies in the euro area so as to ensure their alignment with (1) sound economic principles (such as fiscal discipline and a commitment to a market-based economic system) that foster macroeconomic and financial stability, and (2) with the needs of the single currency. Some concrete legal initiatives in these areas have been proposed by the European Commission, on the basis of the final report of the task force chaired by the President of the EU Council Herman Van Rompuy. In a nutshell, the European Commission recommends strengthening the Stability and Growth Pact, which represents the framework of rules and procedures preventing countries from accumulating excessive public debts and deficits. In addition, the European Commission proposes the establishment of a broader macroeconomic framework for the monitoring of economic policies, which – if not sufficiently sound – can give rise to imbalances such as a loss of competitiveness, current account imbalances and excessive private indebtedness. In addition to these EU-wide proposals at the legislative level, a separate pact (the “Euro Plus Pact”) has been drawn up by the euro area countries and several other EU Member States in order to further strengthen the economic foundations of EMU. The ECB is of the opinion that, in both areas, the current reform efforts are not sufficiently extensive.
“Dealer-to-customer” trading consists of direct transactions between broker-dealers and end-investors, and trading activity tends to be dispersed across both the most recently issued securities, known as “onthe-run” issues, and seasoned securities, known as “off-the-run” issues. The outright purchases of Treasury securities that the Desk conducts to implement monetary policy would fall into the dealer-to-customer category. Much of the trading between dealers, on the other hand, takes place on platforms that provide opportunities for market makers to trade anonymously with each other, with a broker sitting in the middle. Activity taking place over these platforms is often referred to as the “interdealer” market, since dealers have been its traditional participants. The vast majority of trading in the interdealer market has also tended to concentrate in on-the-run issues, given – and likely contributing to – their superior liquidity. This liquidity advantage is reflected in the tendency for on-the-run securities to trade at a slightly lower yield than might be predicted by a theoretical yield curve – a concept often referred to as the “on-the-run premium.”  3  At each Treasury auction, primary dealers are currently required to submit, at a minimum, their equally weighted share of the auction’s total offering size to ensure coverage. This is known as the “pro rata requirement.” In the past, dealers were required to account for 1 percent of secondary trading, but this requirement no longer exists. 4  The level of net marketable debt issuance is also affected by the Treasury’s need to borrow for student loans and other credit programs.