Over on Conservative Home Steve Baker highlights a new paper from two professors at ESCP Europe Business School, which demonstrates the huge level of interconnectivity between the debt problems of different EU economies. The paper suggests that countries should cancel out or write off debt which they owe each other.
Clearly the diagrams above highlight the huge interconnectivity between EU countries and highlights why a long term solution needs to be found as soon as possible. In reality, as the authors of the paper admit, a pure debt write off is not really a viable option. Although these exposures are amalgamated to the country to country level, in actual fact much of the exposure will be through financial sectors and private enterprise, meaning trying to impose a massive write off would cause havoc in these areas. It is still an interesting exercise which should help drive home what is at stake in eurozone debt crisis.