The ECB’s QE: Time to break the doom loop between banks and their governments. CEPS Policy Brief No. 328, March 2015

The recent crises have shown that the eurozone countries’ government debt is not immune to default. Applying a large-exposure requirement also to eurozone government debt would be a logical measure towards breaking the bank-government doom loop, given the low probability and high loss-given government default. But what would be the impact of the application of the large-exposure requirement on the banking sector as well as on government funding? This CEPS Policy Brief presents the results of a simulation exercise performed for 109 systemic banks in the eurozone, showing that their eurozone government debt portfolios would have to decrease by 3.2% or €63 billion, if a 50% of own-funds cap would be applied on large exposures. The eurozone central banks’ demand for sovereign bonds under the extended asset purchase programme further creates momentum to start gradually implementing the restriction.

Dissolved organic carbon in sediments of the central Arctic Ocean collected during POLARSTERN cruise ARK-XXVII/3 from August-September 2012

Marine organic matter (OM) sinks from surface waters to the seafloor via the biological pump. Benthic communities, which use this sedimented OM as energy and carbon source, produce dissolved organic matter (DOM) in the process of remineralization, enriching the sediment porewater with fresh DOM compounds. We hypothesized that in the oligotrophic deep Arctic basin the molecular signal of freshly deposited primary produced OM is restricted to the surface sediment pore waters which should differ from bottom water and deeper sediment pore water in DOM composition. This study focused on: 1) the molecular composition of the DOM in sediment pore waters of the deep Eurasian Arctic basins, 2) whether the signal of marine vs. terrigenous DOM is represented by different compounds preserved in the sediment pore waters and 3) whether there is any relation between Arctic Ocean ice cover and DOM composition. Molecular data, obtained via 15 Tesla Fourier transform ion cyclotron resonance mass spectrometer, were correlated with environmental parameters by partial least square analysis. The fresher marine detrital OM signal from surface waters was limited to pore waters from < 5 cm sediment depth. The productive ice margin stations showed higher abundances of peptides, unsaturated aliphatics and saturated fatty acids formulae, indicative of fresh OM/pigments deposition, compared to northernmost stations which had stronger aromatic signals. This study contributes to the understanding of the coupling between the Arctic Ocean productivity and its depositional regime, and how it will be altered in response to sea ice retreat and increasing river runoff.

Solar radiation over and under sea ice during the POLARSTERN cruise ARK-XXVI/3 (TransArc) in summer 2011

Arctic sea ice has declined and become thinner and younger (more seasonal) during the last decade. One consequence of this is that the surface energy budget of the Arctic Ocean is changing. While the role of surface albedo has been studied intensively, it is still widely unknown how much light penetrates through sea ice into the upper ocean, affecting sea-ice mass balance, ecosystems, and geochemical processes. Here we present the first large-scale under-ice light measurements, operating spectral radiometers on a remotely operated vehicle (ROV) under Arctic sea ice in summer. This data set is used to produce an Arctic-wide map of light distribution under summer sea ice. Our results show that transmittance through first-year ice (FYI, 0.11) was almost three times larger than through multi-year ice (MYI, 0.04), and that this is mostly caused by the larger melt-pond coverage of FYI (42 vs. 23%). Also energy absorption was 50% larger in FYI than in MYI. Thus, a continuation of the observed sea-ice changes will increase the amount of light penetrating into the Arctic Ocean, enhancing sea-ice melt and affecting sea-ice and upper-ocean ecosystems.