Banks at the Service of the Economy? European Policy Brief No. 17, November 2013

This Policy Brief discusses a few simple measures to improve both the commercial and investment banking landscapes, with or without formal separation. Covering deposits with quality collateral would make them safer and would help create an easier guarantee and resolution mechanism at the larger eurozone level. Strong central counterparties and transparency requirements would improve market mechanisms and market discipline in capital markets and investment banking. Specific governance measures would also help improve the financial sector. Finally, a better control of bank solvency, together with improved capital market transparency and accessibility, should encourage the progressive deleveraging of commercial banks, and enhance the long term funding of the economy by capital markets.

The Vulnerability of Europe's Small and Medium-Sized Banks. Bruegel Working Paper 2015/07, 16 July 2015

We study the vulnerability of 130 banks directly supervised by the European Central Bank’s Single Supervisory Mechanism. Illustrative stress tests using banks’ balance sheet data reveal that significant stress prevails in the euro area’s smaller and medium-sized banks, many of them located in southern Europe. The banks we identify as stressed also have performed substantially worse on the stock market. The vulnerable banks are typically hobbled by non-performing loans to European businesses. Strengthening the banking system, therefore, is important to achieve sustainable recovery because it will revitalise credit to the healthier segments of the economy. But instead of emphasising bank recapitalisation, as in past years, we believe the task is to shrink the banking sector to a healthier core.

Addressing the immediate needs of the Greek banks. CEPS Commentary, 31 July 2015

Based on a detailed calculation of the recapitalisation requirements of the Greek banks, we find that the sector needs an infusion of capital, but that the level largely depends on the stringency of the capital requirements applied. An expedient quick fix to comply with the minimum capital requirements could be achieved by a bail-in of existing creditors under the EU Bank Recovery and Resolution Directive of around €5 billion, leaving only €6 billion needed for re-capitalisation. If the ‘Cypriot’ standard is applied, however, the required re-capitalisation would be €15 billion. A ‘generous’ approach, which takes into account the phasing in of the new more-stringent capital requirements until 2018, would imply a re-capitalisation of €29 billion (or more bailing-in of creditors). The re-capitalisation should be undertaken preferably by the EIB, the EBRD or the new Greek investment fund, rather than via loans from the ESM to the Greek government.

Banks and the political economy of the sovereign debt crisis in Italy and Spain. CES Papers - Open Forum #18, 2013-2014

This paper sets out to explain why Spain experienced a full-fledged sovereign debt crisis and had to resort to euroarea financial assistance for its banks, whereas Italy did not. It undertakes a structured comparison, dissecting the sovereign debt crisis into a banking crisis and a balance of payments crisis. It argues that the distinctive features of bank business models and of national banking systems in Italy and Spain have considerable analytical leverage in explaining the different scenarios of the crises in each country. This ‘bank-based’ analysis contributes to the flourishing literature that examines changes in banking with a view to account for the differentiated impact of the global banking crisis first and the sovereign debt crisis in the euroarea later.

Saving the Banks: The Political Economy of Bailouts. CES Papers - Open Forum #8, 2012

How much leeway did governments have in designing bank bailouts and deciding on the height of intervention during the 2007-2009 financial crisis? This paper analyzes comparatively what explains government responses to banking crises. Why does the type of intervention during financial crises vary to such a great extent across countries? By analyzing the variety of bailouts in Europe and North America, we will show that the strategies governments use to cope with the instability of financial markets does not depend on economic conditions alone. Rather, they take root in the institutional and political setting of each country and vary in particular according to the different types of business-government relations banks were able to entertain with public decision-makers. Still, “crony capitalism” accounts overstate the role of bank lobbying. With four case studies of the Irish, Danish, British and French bank bailout, we show that countries with close one-on-one relationships between policy-makers and bank management tended to develop unbalanced bailout packages, while countries where banks have strong interbank ties and collective negotiation capacity were able to develop solutions with a greater burden sharing from private institutions.

The German Constitutional Court’s decision about the European Central Bank’s OMT [Outright Monetary Transactions] mechanism: A masterpiece of judicial arrogance. European Policy Briefs No. 30, April 2014

The German Constitutional Court (BVG) recently referred different questions to the European Court of Justice for a preliminary ruling. They concern the legality of the European Central Bank’s Outright Monetary Transaction mechanism created in 2012. Simultaneously, the German Court has threatened to disrupt the implementation of OTM in Germany if its very restrictive analysis is not validated by the European Court of Justice. This raises fundamental questions about the future efficiency of the ECB’s monetary policy, the damage to the independence of the ECB, the balance of power between judges and political organs in charge of economic policy, in Germany and in Europe, and finally the relationship between the BVG and other national or European courts.

The European Central Bank’s quantitative easing programme: limits and risks. Bruegel Policy Contribution Issue 2016/04, February 2016

The European Central Bank (ECB) has made a number of significant changes to the original guidelines of its quantitative easing (QE) programme since the programme started in January 2015. These changes are welcome because the original guidelines would have rapidly constrained the programme’s implementation. The changes announced expand the universe of purchasable assets and give some flexibility to the ECB in the execution of its programme. However, this might not be enough to sustain QE throughout 2017, or if the ECB wishes to increase the monthly amount of purchases in order to provide the necessary monetary stimulus to the euro area to bring inflation back to 2 percent. To increase the programme’s flexibility, the ECB could further alter the composition of its purchases. The extension of the QE programme also raises some legitimate questions about its potential adverse consequences. However, the benefits of this policy still outweigh its possible negative implications for financial stability or for inequality. The fear that the ECB’s credibility will be undermined because of its QE programme also seems to be largely unfounded. On the contrary, the primary risk to the ECB’s credibility is the risk of not reaching its 2 percent inflation target, which could lead to expectations becoming disanchored.

The effectiveness of the European Central Bank’s Asset Purchase Programme. Bruegel Policy Contribution issue 2016 10 June 2016

Since the end of 2014, inflation has been at or very close to zero. With very little ability to move the actual interest rate further into negative territory, the ECB has resorted to unconventional measures. The latest of these includes a programme to purchase corporate bonds, which started on 8 June 2016.

Morphomechanical Innovation Drives Explosive Seed Dispersal

How mechanical and biological processes are coordinated across cells, tissues, and organs to produce complex traits is a key question in biology. Cardamine hirsuta, a relative of Arabidopsis thaliana, uses an explosive mechanism to disperse its seeds. We show that this trait evolved through morphomechanical innovations at different spatial scales. At the organ scale, tension within the fruit wall generates the elastic energy required for explosion. This tension is produced by differential contraction of fruit wall tissues through an active mechanism involving turgor pressure, cell geometry, and wall properties of the epidermis. Explosive release of this tension is controlled at the cellular scale by asymmetric lignin deposition within endocarp b cells-a striking pattern that is strictly associated with explosive pod shatter across the Brassicaceae plant family. By bridging these different scales, we present an integrated mechanism for explosive seed dispersal that links evolutionary novelty with complex trait innovation.

Developmental control of H+/amino acid permease gene expression during seed development of Arabidopsis

Long distance transport of amino acids is mediated by several families of differentially expressed amino acid transporters. The two genes AAP1 and AAP2 encode broad specificity H+-amino acid co-transporters and are expressed to high levels in siliques of Arabidopsis, indicating a potential role in supplying the seeds with organic nitrogen. The expression of both genes is developmentally controlled and is strongly induced in siliques at heart stage of embryogenesis, shortly before induction of storage protein genes. Histochemical analysis of transgenic plants expressing promoter-GUS fusions shows that the genes have non-overlapping expression patterns in siliques. AAP1 is expressed in the endosperm and the cotyledons whereas AAP2 is expressed in the vascular strands of siliques and in funiculi. The endosperm expression of AAP1 during early stages of seed development indicates that the endosperm serves as a transient storage tissue for organic nitrogen. Amino acids are transported in both xylem and phloem but during seed filling are imported only via the phloem. AAP2, which is expressed in the phloem of stems and in the veins supplying seeds, may function in uptake of amino acids assimilated in the green silique tissue, in the retrieval of amino acids leaking passively out of the phloem and in xylem-to-phloem transfer along the path. The promoters provide excellent tools to study developmental, hormonal and metabolic control of nitrogen nutrition during development and may help to manipulate the timing and composition of amino acid import into seeds.

Enriching plant diversity in grasslands by large-scale experimental sward disturbance and seed addition along gradients of land-use intensity

Aims The relationship between biodiversity and ecosystem functioning is among the most active areas of ecological research. Furthermore, enhancing the diversity of degraded ecosystems is a major goal in applied restoration ecology. In grasslands, many species may be locally absent due to dispersal or microsite limitation and may therefore profit from mechanical disturbance of the resident vegetation. We established a seed addition and disturbance experiment across several grassland sites of different land use to test whether plant diversity can be increased in these grasslands. Additionally, the experiment will allow us testing the consequences of increased plant diversity for ecosystem processes and for the diversity of other taxa in real-world ecosystems. Here we present details of the experimental design and report results from the first vegetation survey one year after disturbance and seed addition. Moreover, we tested whether the effects of seed addition and disturbance varied among grassland depending on their land use or pre-disturbance plant diversity. Methods A full-factorial experiment was installed in 73 grasslands in three regions across Germany. Grasslands were under regular agricultural use, but varied in the type and the intensity of management, thereby representing the range of management typical for large parts of Central Europe. The disturbance treatment consisted of disturbing the top 10 cm of the sward using a rotavator or rotary harrow. Seed addition consisted of sowing a high-diversity seed mixture of regional plant species. These species were all regionally present, but often locally absent, depending on the resident vegetation composition and richness of each grassland. Important findings One year after sward disturbance it had significantly increased cover of bare soil, seedling species richness and numbers of seedlings. Seed addition had increased plant species richness, but only in combination with sward disturbance. The increase in species richness, when both seed addition and disturbance was applied, was higher at high land-use intensity and low resident diversity. Thus, we show that at least the early recruitment of many species is possible also at high land-use intensity, indicating the potential to restore and enhance biodiversity of species-poor agricultural grasslands. Our newly established experiment provides a unique platform for broad-scale research on the land-use dependence of future trajectories of vegetation diversity and composition and their effects on ecosystem functioning.

Seed dispersal characteristics to polar regions by means of visitors

Invasive alien species are among the primary causes of biodiversity change globally, with the risks thereof broadly understood for most regions of the world. They are similarly thought to be among the most significant conservation threats to Antarctica, especially as climate change proceeds in the region. However, no comprehensive, continent-wide evaluation of the risks to Antarctica posed by such species has been undertaken. Here we do so by sampling, identifying, and mapping the vascular plant propagules carried by all categories of visitors to Antarctica during the International Polar Year's first season (2007-2008) and assessing propagule establishment likelihood based on their identity and origins and on spatial variation in Antarctica's climate. For an evaluation of the situation in 2100, we use modeled climates based on the Intergovernmental Panel on Climate Change's Special Report on Emissions Scenarios Scenario A1B [Nakicenovic N, Swart R, eds (2000) Special Report on Emissions Scenarios: A Special Report of Working Group III of the Intergovernmental Panel on Climate Change (Cambridge University Press, Cambridge, UK)]. Visitors carrying seeds average 9.5 seeds per person, although as vectors, scientists carry greater propagule loads than tourists. Annual tourist numbers (~33,054) are higher than those of scientists (~7,085), thus tempering these differences in propagule load. Alien species establishment is currently most likely for the Western Antarctic Peninsula. Recent founder populations of several alien species in this area corroborate these findings. With climate change, risks will grow in the Antarctic Peninsula, Ross Sea, and East Antarctic coastal regions. Our evidence-based assessment demonstrates which parts of Antarctica are at growing risk from alien species that may become invasive and provides the means to mitigate this threat now and into the future as the continent's climate changes.