A budget for Europe's Monetary Union. Bruegel Policy Contribution 2012/22, December 2012

In a monetary union, national fiscal deficits are of limited help to counteract deep recessions; union-wide support is needed. A common euro-area budget (1) should provide a temporary but significant transfer of resources in case of large regional shocks, (2) would be an instrument to counteract severe recessions in the area as a whole, and (3) would ensure financial stability. The four main options for stabilisation of regional shocks to the euro area are: unemployment insurance, payments related to deviations of output from potential, the narrowing of large spreads, and discretionary spending. The common resource would need to be well-designed to be distributionally neutral, avoid free-riding behaviour and foster structural change while be of sufficient size to have an impact. Linking budget support to large deviations of output from potential appears to be the best option. A borrowing capacity equipped with a structural balanced budget rule could address area-wide shocks. It could serve as the fiscal backstop to the bank resolution authority. Resources amounting to 2 percent of euro-area GDP would be needed for stabilisation policy and financial stability.

Monetary policy and banking supervision: coordination instead of separation. CEPS Policy Brief No. 286, 12 December 2012

Introduction. Following the June 2012 European Council decision to place the ‘Single Supervisory Mechanism’ (SSM) within the European Central Bank, the general presumption in the policy discussions has been that there should be ‘Chinese walls’ between the supervisory and monetary policy arms of the ECB. The current legislative proposal, in fact, is explicit on this account. On the contrary, however, this paper finds that there is no need to impose a strict separation between these two functions. The authors argue, in fact, that a strict separation of supervision and monetary policy is not even desirable during a financial crisis when the systemic stability of the financial system represents the biggest threat to a monetary policy that aims at price stability. In their view, the key problem hampering the ECB today is that it lacks detailed information on the state of health of the banking system, which is often highly confidential. Chinese walls would not solve this problem. Moreover, in light of the fact that the new, proposed Supervisory Board will be composed to a large extent of representatives of the same institutions that also dominate the Governing Council, the paper finds that it does not make sense to have Chinese walls between two boards with largely overlapping memberships. In addition, it recommends that some members of the Supervisory Boards should be “independents” in order to reduce the tendency of supervisors to unduly delay the recognition of losses.

The response of tropospheric circulation to perturbations in lower-stratospheric temperature

A multiple regression analysis of the NCEP-NCAR reanalysis dataset shows a response to increased solar activity of a weakening and poleward shift of the subtropical jets. This signal is separable from other influences, such as those of El Nino-Southern Oscillation (ENSO) and the North Atlantic Oscillation (NAO), and is very similar to that seen in previous studies using global circulation models (GCMs) of the effects of an increase in solar spectral irradiance. The response to increased stratospheric (volcanic) aerosol is found in the data to be a weakening and equatorward shift of the jets. The GCM studies of the solar influence also showed an impact on tropospheric mean meridional circulation with a weakening and expansion of the tropical Hadley cells and a poleward shift of the Ferrel cells. To understand the mechanisms whereby the changes in solar irradiance affect tropospheric winds and circulation, experiments have been carried out with a simplified global circulation model. The results show that generic heating of the lower stratosphere tends to weaken the subtropical jets and the tropospheric mean meridional circulations. The positions of the jets, and the extent of the Hadley cells, respond to the distribution of the stratospheric heating, with low-latitude heating forcing them to move poleward, and high-latitude or latitudinally uniform heating forcing them equatorward. The patterns of response are similar to those that are found to be a result of the solar or volcanic influences, respectively, in the data analysis. This demonstrates that perturbations to the heat balance of the lower stratosphere, such as those brought about by solar or volcanic activity, can produce changes in the mean tropospheric circulation, even without any direct forcing below the tropopause.

Sensitivity of the ERA40 reanalysis to the observing system: determination of the global atmospheric circulation from reduced observations

The impact of selected observing systems on the European Centre for Medium-Range Weather Forecasts (ECMWF) 40-yr reanalysis (ERA40) is explored by mimicking observational networks of the past. This is accomplished by systematically removing observations from the present observational data base used by ERA40. The observing systems considered are a surface-based system typical of the period prior to 1945/50, obtained by only retaining the surface observations, a terrestrial-based system typical of the period 1950-1979, obtained by removing all space-based observations, and finally a space-based system, obtained by removing all terrestrial observations except those for surface pressure. Experiments using these different observing systems have been limited to seasonal periods selected from the last 10 yr of ERA40. The results show that the surface-based system has severe limitations in reconstructing the atmospheric state of the upper troposphere and stratosphere. The terrestrial system has major limitations in generating the circulation of the Southern Hemisphere with considerable errors in the position and intensity of individual weather systems. The space-based system is able to analyse the larger-scale aspects of the global atmosphere almost as well as the present observing system but performs less well in analysing the smaller-scale aspects as represented by the vorticity field. Here, terrestrial data such as radiosondes and aircraft observations are of paramount importance. The terrestrial system in the form of a limited number of radiosondes in the tropics is also required to analyse the quasi-biennial oscillation phenomenon in a proper way. The results also show the dominance of the satellite observing system in the Southern Hemisphere. These results all indicate that care is required in using current reanalyses in climate studies due to the large inhomogeneity of the available observations, in particular in time.

Variability of the Atlantic thermohaline circulation described by three-dimensional empirical orthogonal functions

We describe the use of bivariate 3d empirical orthogonal functions (EOFs) in characterising low frequency variability of the Atlantic thermohaline circulation (THC) in the Hadley Centre global climate model, HadCM3. We find that the leading two modes are well correlated with an index of the meridional overturning circulation (MOC) on decadal timescales, with the leading mode alone accounting for 54% of the decadal variance. Episodes of coherent oscillations in the sub-space of the leading EOFs are identified; these episodes are of great interest for the predictability of the THC, and could indicate the existence of different regimes of natural variability. The mechanism identified for the multi-decadal variability is an internal ocean mode, dominated by changes in convection in the Nordic Seas, which lead the changes in the MOC by a few years. Variations in salinity transports from the Arctic and from the North Atlantic are the main feedbacks which control the oscillation. This mode has a weak feedback onto the atmosphere and hence a surface climatic influence. Interestingly, some of these climate impacts lead the changes in the overturning. There are also similarities to observed multi-decadal climate variability.

Enhancement of ENSO variability by a weakened Atlantic thermohaline circulation in a coupled GCM

A coupled ocean–atmosphere general circulation model is used to investigate the modulation of El Niño–Southern Oscillation (ENSO) variability due to a weakened Atlantic thermohaline circulation (THC). The THC weakening is induced by freshwater perturbations in the North Atlantic, and leads to a well-known sea surface temperature dipole and a southward shift of the intertropical convergence zone (ITCZ) in the tropical Atlantic. Through atmospheric teleconnections and local coupled air–sea feedbacks, a meridionally asymmetric mean state change is generated in the eastern equatorial Pacific, corresponding to a weakened annual cycle, and westerly anomalies develop over the central Pacific. The westerly anomalies are associated with anomalous warming of SST, causing an eastward extension of the west Pacific warm pool particularly in August–February, and enhanced precipitation. These and other changes in the mean state lead in turn to an eastward shift of the zonal wind anomalies associated with El Niño events, and a significant increase in ENSO variability. In response to a 1-Sv (1 Sv ≡ 106 m3 s−1) freshwater input in the North Atlantic, the THC slows down rapidly and it weakens by 86% over years 50–100. The Niño-3 index standard deviation increases by 36% during the first 100-yr simulation relative to the control simulation. Further analysis indicates that the weakened THC not only leads to a stronger ENSO variability, but also leads to a stronger asymmetry between El Niño and La Niña events. This study suggests a role for an atmospheric bridge that rapidly conveys the influence of the Atlantic Ocean to the tropical Pacific and indicates that fluctuations of the THC can mediate not only mean climate globally but also modulate interannual variability. The results may contribute to understanding both the multidecadal variability of ENSO activity during the twentieth century and longer time-scale variability of ENSO, as suggested by some paleoclimate records.

The influence of a weakening of the Atlantic meridional overturning circulation on ENSO

The influences of a substantial weakening of the Atlantic meridional overturning circulation (AMOC) on the tropical Pacific climate mean state, the annual cycle, and ENSO variability are studied using five different coupled general circulation models (CGCMs). In the CGCMs, a substantial weakening of the AMOC is induced by adding freshwater flux forcing in the northern North Atlantic. In response, the well-known surface temperature dipole in the low-latitude Atlantic is established, which reorganizes the large-scale tropical atmospheric circulation by increasing the northeasterly trade winds. This leads to a southward shift of the intertropical convergence zone (ITCZ) in the tropical Atlantic and also the eastern tropical Pacific. Because of evaporative fluxes, mixing, and changes in Ekman divergence, a meridional temperature anomaly is generated in the northeastern tropical Pacific, which leads to the development of a meridionally symmetric thermal background state. In four out of five CGCMs this leads to a substantial weakening of the annual cycle in the eastern equatorial Pacific and a subsequent intensification of ENSO variability due to nonlinear interactions. In one of the CGCM simulations, an ENSO intensification occurs as a result of a zonal mean thermocline shoaling. Analysis suggests that the atmospheric circulation changes forced by tropical Atlantic SSTs can easily influence the large-scale atmospheric circulation and hence tropical eastern Pacific climate. Furthermore, it is concluded that the existence of the present-day tropical Pacific cold tongue complex and the annual cycle in the eastern equatorial Pacific are partly controlled by the strength of the AMOC. The results may have important implications for the interpretation of global multidecadal variability and paleo-proxy data.

Historical reconstruction of the Atlantic Meridional Overturning Circulation from the ECMWF operational ocean reanalysis

A reconstruction of the Atlantic Meridional Overturning Circulation (MOC) for the period 1959–2006 has been derived from the ECMWF operational ocean reanalysis. The reconstruction shows a wide range of time-variability, including a downward trend. At 26N, both the MOC intensity and changes in its vertical structure are in good agreement with previous estimates based on trans-Atlantic surveys. At 50N, the MOC and strength of the subpolar gyre are correlated at interannual time scales, but show opposite secular trends. Heat transport variability is highly correlated with the MOC but shows a smaller trend due to the warming of the upper ocean, which partially compensates for the weakening of the circulation. Results from sensitivity experiments show that although the time-varying upper boundary forcing provides useful MOC information, the sequential assimilation of ocean data further improves the MOC estimation by increasing both the mean and the time variability.