Mark Wadsworth

This is a spare 'blog in case my main 'blog at markwadsworth.blogspot.com isn't working

“The Great EU Debt Write-Off”

As I’ve long been saying, for every financial asset there is a financial liability (they always net off to +/- nothing) and the reason that banks’ balance sheet totals are so huge is because they all owe each other vast sums of money; if you took all banks as a whole and netted off inter-bank payables/receivables, their balance sheet total would shrink by two-thirds.

Steve Baker MP* at ConHome refers us to the results of an exercise carried out by the ESCP Europe Business School (who appear to be quite well known) applying the same principles to
payables/receivables between eight different Member States of the EU:

* 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

Steve Baker MP is a man to watch, having once suggested that UK government gilts held by the Bank of England can simply be cancelled (unless Steven Baker MP is a different person to Steve Baker MP?). He also mentions the unfortunately named Mark Reckless MP who is (or was) a big fan of debt-for-equity swaps (once he was on course to become an MP, he told me to stop emailing him on the topic).

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2 responses to ““The Great EU Debt Write-Off”

  1. Anthony J Evans May 24, 2011 at 1:56 pm

    Maybe you should link to the FT business school rankings rather than our website!!

  2. Earle January 8, 2015 at 8:18 am

    Today i spent 300 dollars for platinium roulette system , i hope that i will earn my first money online

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