Friday, 4 November 2011

A solution to the eurozone debt problem?

Courtesy of one of my commenters I was directed to this website.

It presents the results of a simulation conducted by students at ESCP Europe Business School. The aim was to uncover the amount of interlinked debt between Portugal, Ireland, Italy, Greece, Spain, Britain, France, and Germany; and then see what would happen if they attempted to cross cancel obligations.

The countries can reduce their total debt by 64% through cross cancellation of interlinked debt, taking total debt from 40.47% of GDP to 14.58%
  • Six countries – Ireland, Italy, Spain, Britain, France and Germany – can write off more than 50% of their outstanding debt
  • Three countries - Ireland, Italy, and Germany – can reduce their obligations such that they owe more than €1bn to only 2 other countries
  • Ireland can reduce its debt from almost 130% of GDP to under 20% of GDP
  • France can virtually eliminate its debt – reducing it to just 0.06% of GDP 


Dave H said...

Isn't that along the lines of the tale where a man walks into a hotel, puts down a tenner to provisionally reserve a room, then goes to inspect it. While he's gone, the hotel manager takes the tenner and gives it to the baker over the road to pay off the debt he owes. The baker takes the tenner to the milkman to pay off his debt. The milkman gives the tenner to the prostitute to clear his debt, and the prostitute goes into the hotel and pays what she owed for renting a room. Then the man comes down, decides he doesn't want to take the room after all, the manager gives him his tenner back and he goes on his way.

WitteringsfromWitney said...

DH: Exactly, isn't economics simple when you break it down to basics?

IanPJ said...

Ah, but the illusion of these telephone number sized debts must be maintained until all the political goals have been achieved, especially a single European monetary union, a single EU Central bank and the elimination of national CBs.

They are forcing the capitulation of what remains of national sovereignty in the Eurozone.

TomTom said...

Ah but eliminating cross-linked debts requires lawyers and then the spiralling debt pyramid starts all over again !

WitteringsfromWitney said...

IPJ: Sooner or later the penny will drop with the electorate - I hope.

TT: True, but above also.......