Flashlight Europe N°5–June 2015. OMT is Monetary Policy and Not Economic Policy

In January 2014, for the first time in its history, the German Federal Constitutional Court submitted several questions to the European Court of Justice (ECJ) in Luxembourg and asked for a preliminary ruling. The questions had arisen within the framework of the OMT case, and the issue was whether or not the OMT (“outright monetary transactions”) programme announced by Mario Draghi, the head of the European Central Bank (ECB), is in compliance with the law of the European Union. The OMT programme (which has be-come well-known because Draghi said “what-ever it takes to preserve the euro” when he unveiled it) plays an important role in the stabilization of the euro area. It means that the European System of Central Banks will be empowered to engage in unlimited buying of government bonds issued by certain Member States if and as long as these Member States are simultaneously taking part in a European rescue or reform programme (under the EFSF ot the ESM). Hitherto the OMT has not been implemented. Nonetheless a suit contesting its legality was filed with the Federal Constitutional Court. The European Court of Justice now had to decide whether or not the activities of the ECB were in compliance with European law. How-ever, the ECJ had to take into account the prior assessment of the Federal Constitutional Court. In its submission the Federal Constitutional Court made it quite clear that it was of the opinion that there has been a violation of European law. But at the same time it did not exclude the possibility that the ECJ set up legal conditions for OMT in order to avoid a violation of European law.

Unfinished business: the governance of the Economic and Monetary Union. Compendium of EPC publications on the future of the Euro

Europe is once again engulfed in crisis. The sheer scale of refugees coming daily is not only a major challenge for the transit and destination countries, it is also exposing distrust between member states (and vis-à-vis the EU institutions). It has also shown that there is an unwillingness to cooperate and compromise within the EU system, in part a collateral damage of the eurocrisis. With a continuing sluggish economy and high unemployment, external challenges such as the conflict in Ukraine and internal ones like the referendum on EU membership in the UK, the EMU crisis looks less urgent at this point, with an agreement with Greece preventing the disastrous consequences of a Grexit, at least for now.

Free Movement of Persons: The Mirage of Social Security Schemes. Bruges European Economic Research Papers (BEER) 34/2015

The purpose of this paper is to address the issue of social security benefits that jobseekers, nationals of other Member State, residing in another Member States are in title to, as well as the economic implications of free movement of persons and labour market access. Consequently, it aims to disentangle between labour mobility welfare effects and “benefit tourism” looking in particular at the United Kingdom social security system and analysing the policy framework currently in place that governs the free movement of people across the European Union Member States.

How to get out of the crisis without reforms? The Belarusian authorities confront growing economic problems. OSW Commentary NUMBER 202/21.03.2016

2015 saw a drop in Belarus’s GDP for the first time in almost 20 years, which is primarily the result of a significant reduction in levels of production and export. As a consequence, there was also a serious depletion of the country’s foreign exchange reserves, as well as a progressive weakening of the Belarusian rouble. The macroeconomic figures from January and February 2016 show that these trends are not only continuing, but they are also becoming even more severe, which confirms that Belarus now finds itself in a prolonged economic crisis. On one hand, the reason for this state of affairs is the protracted economic recession in Russia, which is Belarus’s main economic partner, together with the drastic global decline in prices for fuel, which is a key Belarusian export. On the other hand, meanwhile, an equally important reason for the current crisis is the failure of the Belarusian economic model. President Aleksandr Lukashenko, out of fear that his authoritarian system of government will be dismantled and that public discontent will rise, has categorically rejected the proposals for even partial reforms put forward by some of his entourage, who are aware of the need for the immediate transformation of the country’s anachronistic and very costly economic model, based as it still is on quasi-Soviet management policies.

Between nuclear armament and economic pragmatism: Is North Korea facing change? Asia Policy Brief 2013/04, September 2013

The balance a year and a half after the meanwhile second hereditary power transfer to Kim Jong-Un (Kim Chŏng-ŭn), grandson of the founder of the state, is undecided. The breakdown of the system, predicted by many analysts, has not happened yet. Neither have the reforms that were expected from the young man who has supposedly been educated in Switzerland. The country is not in stagnation however – quite the opposite. What has happened in North Korea in the last two years? What development trends are there and how can other countries approach them? These questions are discussed in the light of the tense security-political and humanitarian environment and the corresponding risks in this Asia Policy Brief.

Fine-tuning the use of bail-in to promote a stronger EU financial system. CEPS Special Report No. 136/April 2016

This paper discusses the application of the new European rules for burden-sharing and bail-in in the banking sector, in view of their ability to accommodate broader policy goals of aggregate financial stability. It finds that the Treaty principles and the new discipline of state aid and the restructuring of banks provide a solid framework for combating moral hazard and removing incentives that encourage excessive risk-taking by bankers. However, the application of the new rules may have become excessively attentive to the case-by-case evaluation of individual institutions, while perhaps losing sight of the aggregate policy needs of the banking system. Indeed, in this first phase of the banking union, while large segments of the EU banking sector still require a substantial restructuring and recapitalisation, the market may not be able to provide all the needed resources in the current environment of depressed profitability and low growth. Thus, a systemic market failure may be making the problem impossible to fix without resorting to temporary public support. But the risk of large write-offs of capital instruments due to burden-sharing and bail-in may represent an insurmountable obstacle to such public support as it may set in motion an investors’ flight. The paper concludes by showing that existing rules do contain the flexibility required to accommodate aggregate policy requirements in the general interest, and outlines a public support scheme for the precautionary recapitalisation of solvent banks that would be compliant with EU law.

Business under supervision – pathologies serving the system of power in Russia. OSW COMMENTARY NUMBER 212 | 31.05.2016

The relations between Russia’s authorities and business circles are subordinated not so much to rational economic calculations as to the interests of political elites. The key interest in this case is maintaining the current model of government. The formal and informal supervision of business by law enforcement agencies is an important element of Russia’s economic reality. Despite the rhetoric of high-ranking officials, intended to suggest that the state is taking care of businesspeople’s interests, it is evident that there is no will to devise a systemic solution to the most urgent problems, including the state institutions’ disrespect for the rights of ownership.

The cultivation of Castanea sativa (Mill.) in Europe, from its origin to its diffusion on a continental scale

The history of Castanea sativa (sweet chestnut) cultivation since medieval times has been well described on the basis of the very rich documentation available. Far fewer attempts have been made to give a historical synthesis of the events that led to the cultivation of sweet chestnut in much earlier times. In this article we attempt to reconstruct this part of the European history of chestnut cultivation and its early diffusion by use of different sources of information, such as pollen studies, archaeology, history and literature. Using this multidisciplinary approach, we have tried to identify the roles of the Greek and Roman civilizations in the dissemination of chestnut cultivation on a European scale. In particular, we show that use of the chestnut for food was not the primary driving force behind the introduction of the tree into Europe by the Romans. Apart from the Insubrian Region in the north of the Italian peninsula, no other centre of chestnut cultivation existed in Europe during the Roman period. The Romans may have introduced the idea of systematically cultivating and using chestnut. In certain cases they introduced the species itself; however no evidence of systematic planting of chestnut exists. The greatest interest in the management of chestnut for fruit production most probably developed after the Roman period and can be associated with the socio-economic structures of medieval times. It was then that self-sufficient cultures based on the cultivation of chestnut as a source of subsistence were formed.

Sedimentology at the continental margin of the southern Weddell Sea

During four expeditions with RV "Polarstern" at the continental margin of the southern Weddell Sea, profiling and geological sampling were carried out. A detailed bathymetric map was constructed from echo-sounding data. Sub-bottom profiles, classified into nine echotypes, have been mapped and interpreted. Sedimentological analyses were carried out on 32 undisturbed box grab surface samples, as well as on sediment cores from 9 sites. Apart from the description of the sediments and the investigation of sedimentary structures on X-radiographs the following characteristics were determined: grain-size distributions; carbonate and Corg content; component distibutions in different grain-size fractions; stable oxygen and carbon isotopes in planktic and, partly, in benthic foraminifers; and physical properties. The stratigraphy is based On 14C-dating, oxygen isotope Stages and, at one site, On paleomagnetic measurements and 230Th-analyses The sediments represent the period of deposition from the last glacial maximum until recent time. They are composed predominantly of terrigenous components. The formation of the sediments was controlled by glaciological, hydrographical and gravitational processes. Variations in the sea-ice coverage influenced biogenic production. The ice sheet and icebergs were important media for sediment transport; their grounding caused compaction and erosion of glacial marine sediments on the outer continental shelf. The circulation and the physical and chemical properties of the water masses controlled the transport of fine-grained material, biogenic production and its preservation. Gravitational transport processes were the inain mode of sediment movements on the continental slope. The continental ice sheet advanced to the shelf edge and grounded On the sea-floor, presumably later than 31,000 y.B.P. This ice movement was linked with erosion of shelf sediments and a very high sediment supply to the upper continental slope from the adiacent southern shelf. The erosional surface On the shelf is documented in the sub-bottom profiles as a regular, acoustically hard reflector. Dense sea-ice coverage above the lower and middle continental slope resulted in the almost total breakdown of biogenic production. Immediately in front of the ice sheet, above the upper continental slope, a <50 km broad coastal polynya existed at least periodically. Biogenic production was much higher in this polynya than elsewhere. Intense sea-ice formation in the polynya probably led to the development of a high salinity and, consequently, dense water mass, which flowed as a stream near bottom across the continental slope into the deep sea, possibly contributing to bottom water formation. The current velocities of this water mass presumably had seasonal variations. The near-bottom flow of the dense water mass, in combination with the gravity transport processes that arose from the high rates of sediment accumulation, probably led to erosion that progressed laterally from east to West along a SW to NE-trending, 200 to 400 m high morphological step at the continental slope. During the period 14,000 to 13,000 y.B.P., during the postglacial temperature and sea-level rise, intense changes in the environmental conditions occured. Primarily, the ice masses on the outer continental shelf started to float. Intense calving processes resulted in a rapid retreat of the ice edge to the south. A consequence of this retreat was, that the source area of the ice-rafted debris changed from the adjacent southern shelf to the eastern Weddell Sea. As the ice retreated, the gravitational transport processes On the continental slope ceased. Soon after the beginning of the ice retreat, the sea-ice coverage in the whole research area decreased. Simultaneously, the formation of the high salinity dense bottom water ceased, and the sediment composition at the continental slope then became influenced by the water masses of the Weddell Gyre. The formation of very cold Ice Shelf Water (ISW) started beneath the southward retreating Filchner-Ronne Ice Shelf somewhat later than 12,000 y.B.P. The ISW streamed primarily with lower velocities than those of today across the continental slope, and was conducted along the erosional step on the slope into the deep sea. At 7,500 y.B.P., the grounding line of the ice masses had retreated > 400 km to the south. A progressive retreat by additional 200 to 300 km probably led to the development of an Open water column beneath the ice south of Berkner Island at about 4,000 y.B.P. This in turn may have led to an additional ISW, which had formed beneath the Ronne Ice Shelf, to flow towards the Filcher Ice Shelf. As a result, increased flow of ISW took place over the continental margin, possibly enabling the ISW to spill over the erosional step On the upper continental slope towards the West. Since that time, there is no longer any documentation of the ISW in the sedimentary Parameters on the lower continental slope. There, recent sediments reflect the lower water masses of the Weddell Gyre. The sea-ice coverage in early Holocene time was again so dense that biogenic production was significantly restricted.

Iodine ages of pore water at Hydrate Ridge, Cascadian continental margin

Hydrate Ridge off the coast of Oregon, USA, is a prime example for gas hydrate occurrences in active margin settings. It is part of the Cascadia Margin and was the focus of Ocean Drilling Program (ODP) Leg 204, which successfully recovered fluids from nine sites from the southern part of the ridge. Iodide concentrations in pore fluids associated with gas hydrates are strongly enhanced, by factors up to 5000 compared to seawater, which allows the use of this biophilic element as tracer for organic source regions. We applied the cosmogenic isotope 129I (T1/2=15.7 Ma) system to determine the age of the organic source formation responsible for the iodide enrichment. In all sites at ODP Leg 204, 129I/I ratios were found to decrease with depth to values around 250x10**-15, corresponding to minimum ages of 40 Ma, but in several sites, maxima in the 129I/I ratios point to the local addition of young iodide. The results indicate that a large amount of iodide was derived from deep accreted sediments of Eocene age, and that additional source regions provide iodide of Late Miocene age. The presence of old iodide in the pore waters suggests that fluid pathways are open to allow transport over large distances into the gas hydrate fields. The strong correlation between iodide and methane in hydrate fields coupled with the similarity in transport parameters in aqueous solutions suggests that a large fraction of methane in gas hydrates also has old sources and is transported into the present locations from source regions of Eocene age.

Quantitative composition and distribution of the silt fraction in surface sediments of the North-West African continental margin

Surface sediments from the continental slope and rise of North-West Africa between the Canary lslands and the Cape Verde Islands are mainly composed of silt-sized material (2-63 µm). A number of sampling profiles were run normal to the coast and the composition of the silt fraction was determined quantitatively by scanning electron microscope analysis. The carbonate portion of the sediment was found to be nearly exclusively of biogenic origin. The most important contributors are planktonic foraminifers and coccoliths with minor contributions derived from pteropods. Plankton-produced biogenic opal such as diatoms and radiolarians play a very minor role. The high production rates of opal-silica plankton which exists in the surface waters of the NW-African upwelling system does not give rise to corresponding increases of opal accumulation in the bottom sediment. Benthic producers consist mainly of foraminifers and molluscs but the entire input from benthic producers is extremely small. An exception to this occurs in the prodelta sediments of the Senegal river. Downslope particle transport is indicated by the occurrence of shallow-water coralline algae, ascidian sclerites and cliona boring chips and can be traced as far down as the continental rise. The non-carbonate silt fraction mostly consists of quartz which is derived as eolian dust from the Sahara desert by the Harmattan and the NE-Trade-wind system. The percentage of carbonate in the surface sediments directly indicates the relative proportions of autochthonous biogenic components and terrigenous allochthonous quartz particles.

Organic matter based proxies from surface sediments along three transects on the Pakistan continental margin

A valid assessment of selective aerobic degradation on organic matter (OM) and its impact on OM-based proxies is vital to produce accurate environmental reconstructions. However, most studies investigating these effects suffer from inherent environmental heterogeneities. In this study, we used surface samples collected along two meter-scale transects and one longer transect in the northeastern Arabian Sea to constrain initial OM heterogeneity, in order to evaluate selective aerobic degradation on temperature, productivity and alteration indices at the sediment-water interface. All of the studied alteration indices, the higher plant alkane index, alcohol preservation index, and diol oxidation index, demonstrated that they are sensitive indicators for changes in the oxygen regime. Several export production indices, a cholesterol-based stanol/stenol index and dinoflagellate lipid- and cyst-based ratios, showed significant (more than 20%) change only over the lateral oxygen gradients. Therefore, these compounds do not exclusively reflect surface water productivity, but are significantly altered after deposition. Two of the proxies, glycerol dibiphytanyl glycerol tetraether-based TEX86 sea surface temperature indices and indices based on phytol, phytane and pristane, did not show any trends related to oxygen. Nevertheless, unrealistic sea surface temperatures were obtained after application of the TEX86, TEX86L, and TEX86H proxies. The phytol-based ratios were likely affected by the sedimentary production of pristane. Our results demonstrate the selective impact of aerobic organic matter degradation on the lipid and palynomorph composition of surface sediments along a short lateral oxygen gradient and suggest that some of the investigated proxies may be useful tracers of changing redox conditions at the sediment-water interface.

Solar sensitivity experiments for the pre-industrial time period using the comprehensive global climate model CCSM3 (Community Climate System Model 3)

The Southern Hemisphere Westerly Winds (SWW) constitute an important zonal circulation that influences large-scale precipitation patterns and ocean circulation. Variations in their intensity and latitudinal position have been suggested to exert a strong influence on the CO2 budget in the Southern Ocean, thus making them a potential factor affecting the global climate. The possible influence of solar forcing on SWW variability during the Holocene is addressed. Solar sensitivity experiments with a comprehensive global climate model (CCSM3) are carried out to study the response of SWW to solar variability. In addition, It is shown that a high-resolution iron record from the Chilean continental slope (41° S), which is interpreted to reflect changes in the position of the SWW, is significantly correlated with reconstructed solar activity during the past 3000 years. Taken together, the proxy and model results suggest that centennial-scale periods of lower (higher) solar activity caused equatorward (southward) shifts of the annual mean SWW.

Planktonic foraminiferal faunas and stable isotope ratios of sediments from the Benguela Upwelling System

Two sediment cores retrieved from the continental slope in the Benguela Upwelling System, GeoB 1706 (19°33.7'S 11°10.5'E) and GeoB 1711 (23°18.9'S, 12°22.6'E), reveal striking variations in planktonic foraminiferal abundances during the last 160,000 years. These fluctuations are investigated to assess changes in the intensity and position of the upwelling centres off Namibia. Four species make up over 95% of the variation within the core, and enable the record to be divided into episodes characterized by particular planktonic foraminiferal assemblages. The fossil assemblages have meaningful ecological significance when compared to those of the modern day and the relationship to their environment. The cold-water planktonic foraminifer, Neogloboquadrina pachyderma sinistral [N. pachyderma (s)], dominates the modern-day, coastal upwelling centres, and Neogloboquadrina pachyderma dextral and Globigerina bulloides characterize the fringes of the upwelling cells. Globorotalia inflata is representative of the offshore boundary between newly upwelled waters and the transitional, reduced nutrient levels of the subtropical waters. In the fossil record, episodes of high N. pachyderma (s) abundances are interpreted as evidence of increased upwelling intensity, and the associated increase in nutrients. The N. pachyderma (s) record suggests temporal shifts in the intensity of upwelling, and corresponding trophic domains, that do not follow the typical glacial-interglacial pattern. Periods of high N. pachyderma (s) abundance describe rapid, discrete events dominating isotope stages 3 and 2. The timing of these events correlates to the temporal shifts of the Angola-Benguela Front (Jansen et al., 1997) situated to the north of the Walvis Ridge. Absence of high abundances of N. pachyderma (s) from the continental slope of the southern Cape Basin indicates that Southern Ocean surface water advection has not exerted a major influence on the Benguela Current System. The coincidence of increased upwelling intensity with the movement of the Angola-Benguela Front can be interpreted mainly by changes in strength and zonality of the trade wind system.

Costs and problems of completing the interstate highway system; report to the Congress.

Mode of access: Internet.