Student study: Ireland could write off 85 per cent of its European debt

Paddy Samurai

AN ECONOMICS SIMULATION carried out by students from an elite pan-continental business school has concluded that the Irish government could write off a whopping €184 billion in debt – simply by cancelling out its debts with those of other countries.
A study carried out by postgraduate students at the ESCP Business School said eight European debt-laden European economies could simply write off over €2 trillion in debt, by cancelling out obligations where countries owed money to each other.
The same simple procedure – where the five weak ‘PIIGS’ economies, Britain, France and Germany all simply ‘cancel out’ any debts they hold to each other – would reduce Ireland’s outstanding debts by over 85 per cent, according to the findings.
The exercise, carried out across three stages on a date in May, worked as follows:

1. Two countries who owe money to each other – and where those loans fall due at around the same time – simply cancel each other out;
2. Three countries, who owe money to each other in a ‘triangular’ arrangement – and, again, where all of the loans fall due at the same time – write off their debts to each other;
3. A session of ‘free trading’ where countries could negotiate other settlements – where, for example, a selection of 2-year and 4-year loans from one side could be traded off with 3-year loans from the other side.

In Ireland’s case, the students found that the debt – of some €215bn at the time of the exercise – could be reduced to a little over €31bn, with the majority of the debt being written off after stage 1 of the simulation.
While Greece would still struggle to make much a dent in its own mountain of debt – seemingly because most of its debts are held by European countries outside of the other seven – other countries would fare far better.
France would be able to become virtually debt-free under the simulation, simply because most of its debt is held by Germany and vice-versa – with France benefitting to the tune of €382 billion overall.
Germany would reduce its debt from €563bn to €103bn – a drop of 81 per cent – while Spain and Italy would approximately halve their debts.
While the students admit that their simulation “does not solve” the problem of the EU debt crisis, they said it at least showed that debt cancellation was a viable policy option:

The fact that so much debt is interlinked presents a real opportunity to solve the problem.The web of interlinked debt is too thick to be dusted away by classroom games, however policymakers should attempt to replicate this study, and they may find that instead of spinning further webs they might get out a duster to clean things up.

It might all be academic – literally – but on the first anniversary of Brian Lenihan’s admission that we were looking for a €67.5bn bailout, it’s a sobering thought.
More on the study can be found at the nicely-named EUdebtwriteoff.com.

http://www.thejournal.ie/student-study-ireland-could-write-off-85-per-cent-of-its-european-debt-284750-Nov2011/

Is this possible,or is it just bullsh!t.I mean if we can do it ,should we not jump at it.Let the negotiations begin.:eek:

saa

Well I don't believe their theory's will work out that well but sure lets give me a shot..

Dartz

Since when have governments used common sense?

starbelgrade

AN ECONOMICS SIMULATION carried out by students from an elite pan-continental business school has concluded that the Irish government could write off a whopping €184 billion in debt – simply by cancelling out its debts with those of other countries.

So they found out that you can cancel debt by cancelling debt?

Give those students an award.

ScumLord

But how would the bankers and solicitors make their commissions?

MagicSean

i thought the debt was owed to banks and not the countries themselves

eth0

All our debt and all other countries debt is just a few bytes on a computer somewhere. It is amazing the fuss thats made over it really

D'Agger

eth0 wrote: »

All our debt and all other countries debt is just a few bytes on a computer somewhere. It is amazing the fuss thats made over it really

Yeah sure turn it off and turn it on again - we're golden

ejmaztec

Dartz wrote: »

Since when have governments used common any sense?

fyp

Fromthetrees

I wish Ireland was debt free.......:(

syklops

Yeah but who is that money owed by? I seriously doubt Germany owes us any money. Is it not a case that a lot of the money owed to us is by African and other 3rd world countries. Now if Germany some how owes them money, then it could all be cancelled out, but I doubt that is the case either.

finfinfin

So they found out that you can cancel debt by cancelling debt?

Give those students an award.[/Quote]


greatest post ever!fairplay.

these students probably paid a lot of money to go to to this elite business school too.the future is bright!

Mr. Incognito

Who owes us Money.

Seriously.

EDIT.

I just followed the links and read it- It is based on a New York times report and is NOT costed or accurate. It's bull in other words.

Step 1: The Preparation (3 hours)
Students are split into pairs and assigned 1 country per pair. In the trial run we limited the exercise to
the following 5 “PIIGS”: Portugal, Ireland, Italy, Greece, Spain. For the actual simulation we
expanded this to include Britain, France, and Germany making a total of 8 countries. After a brief
presentation explaining the premise of the simulation, students were expected to conduct desk research
to establish the following:
- Validate the total outstanding debt
We used the NYT article as a starting point and attempted to validate the figures through
alternative data sources. All currency conversions were be made with the same exchange rate2,
and all values were to be expressed in €bn (to 2 decimal places)3.

We recognise that our numbers are not accurate. The assumptions being used mean that our data will
not reflect the real position of each country5.

The BIS were helpful in providing data, however they pointed out that the actual information we
required – the breakdown per country and per maturity – is restricted information. The fact that central
banks do not publicly disclose this is a telling finding of our stud

It's kids in a classroom, it doesn't define Debt- is it National, Private etc.

Bollox.

Aka Ishur

To make it really simple-

They are using this statement -

Ireland owes Germany 25 bil but Germany owes Ireland 15 bil, therefore Ireland owes 10 bil and Germany is in the clear.

We are using this statement -

Anglo owes Deutchbank 25bil but Deutchbank owes BoI 15bil, therefore ....well Anglo owes Deutchbank 25bil and Deutchbank owes BoI 15bil.

No company is gonna take on anothers debts. Except Ireland Inc. we know we know....

Mr. Incognito

Aka Ishur wrote: »

To make it really simple-

They are using this statement -

Ireland owes Germany 25 bil but Germany owes Ireland 15 bil, therefore Ireland owes 10 bil and Germany is in the clear.

We are using this statement -

Anglo owes Deutchbank 25bil but Deutchbank owes BoI 15bil, therefore ....well Anglo owes Deutchbank 25bil and Deutchbank owes BoI 15bil.

No company is gonna take on anothers debts. Except Ireland Inc. we know we know....

No they are not.

Read the report- Links are above

Ponster

According to this link the UK owes us €133 billion (and we owe then €104 billion)

foxyboxer

Anglo owes Deutchbank 25bil but Deutchbank owes BoI 15bil, therefore ....well Anglo owes Deutchbank 25bil and Deutchbank owes BoI 15bil.

Considering the sh1tstorm happening in the EU, I'd feel it's safe to say that the current banking system and it's management have failed completely.

The German Government could nationalise Deutshce Bank etc like Ireland did Anglo and make this work.

New banks can be set up, New banking policies can be created.
If the private banks have a problem with that then TS. New euro wide legislation would prevent any legal reprecussions.

Mr. Incognito

Ponster wrote: »

According to this link the UK owes us €133 billion (and we owe then €104 billion)

No-According to said Link

by debtors - both government and private - in another country. It does not include non-bank debts. Only key eurozone debtors and their top creditors are shown. Although China is known to hold European debt, no comprehensive figures are available.

Look, this might be difficult to get your heads around but these are consolidations of private and bank debt and are not equivalent debts.

It's like me owing a bank for my mortgage and the bank owing the government taxes and saying oh- outgoings here and incoming here, lets write them off.

It doesn't work like that in the real world and this is more idiot economics.

I'm sick of lazy idiot journalists that don't even do the tiniest bit of research.

Want a Journalism degree??

Control+C

Control+V

There you go.

Mr. Incognito

Anglo owes Deutchbank 25bil but Deutchbank owes BoI 15bil, therefore ....well Anglo owes Deutchbank 25bil and Deutchbank owes BoI 15bil.

Dear Lord.

It doesn't work like that at all.

Anglo will have a mixture of current funds, capital funds, secured assets, unsecured assets, futures, options, and all sorts of other financial instruments.

Some are liquid, some are not. Their interdependent debts are held on account, for individuals, companies and creditors. The banks don't owe each other some magical overall sum.

You cannot write or net them off. Does anyone around here have any understanding of commerce or commercial reality?

K-9

It's AH Incognito, it makes taxi drivers look like Nobel prize winning economists.

Mr. Incognito

K-9 wrote: »

It's AH Incognito, it makes taxi drivers look like Nobel prize winning economists.

It makes Journalists look like clowns.

This is a report prepared by secondary kids in three hours in a classroom using google and an article from the NY Times.

And yet when I open the Metro tomorrow I expect to see it quoted as a reputable source because some dope journo was too lazy to click through and read the 12 pages of it.

Paddy Samurai

Mr. Incognito wrote: »

It doesn't work like that in the real world and this is more idiot economics.

This is supposed to be an "Elite "economics school.
Does'nt bode well for the future .

kowloon

Mr. Incognito wrote: »

Does anyone around here have any understanding of commerce or commercial reality?

I was in a bank once.

RachaelVO

The brains of our future???? Jesus Wept!

This report is ridiculous. It give the impression that people will happily write of your debt cos your neighbour, who just happens to live on the same street owes your creditor money!!!

Seriously, as was posted earlier, it's not a case of Ireland oweing Germany money, it's a case of the Irish Exchequer borrowing from the markets, from investors, private banks etc; And vice versa. I don't see them all sitting around a table sharing a coke agreeing to this at all!

Robdude

Mr. Incognito wrote: »

Dear Lord.

It doesn't work like that at all.

Anglo will have a mixture of current funds, capital funds, secured assets, unsecured assets, futures, options, and all sorts of other financial instruments.

Some are liquid, some are not. Their interdependent debts are held on account, for individuals, companies and creditors. The banks don't owe each other some magical overall sum.

You cannot write or net them off. Does anyone around here have any understanding of commerce or commercial reality?

Thank you.

I'm starting to believe that 90% of everything I read is just crap written by someone whose goal was simply to write an article.

ScumLord

Mr. Incognito wrote: »

You cannot write or net them off. Does anyone around here have any understanding of commerce or commercial reality?

No, the vast majority of people haven't a clue and I'm including myself in there. The entire system has been engineered to use complex terms and language so that it is beyond the average person. I think it's so convoluted so they can get away with conning people out of money. I don't trust the banking system which is why I start jumping up and down on the spot when something like this comes out. I want it to be true more than anything because I certainly don't understand any of it.

Striking off debt owed between two organisations seems very logical to me when I don't know the full in's and out's.

mickydoomsux

ScumLord wrote: »

No, the vast majority of people haven't a clue and I'm including myself in there. The entire system has been engineered to use complex terms and language so that it is beyond the average person. I think it's so convoluted so they can get away with conning people out of money. I don't trust the banking system which is why I start jumping up and down on the spot when something like this comes out. I want it to be true more than anything because I certainly don't understand any of it.

Striking off debt owed between two organisations seems very logical to me when I don't know the full in's and out's.

Jesus wept.

"I don't understand it so it has clearly been created deliberately to confuse people like me".

For Forks Sake

Mr. Incognito wrote: »

It makes Journalists look like clowns.
.

TheJournal.ie seems to be populated by 'jpurnalists' who've been laid off/fired/weren't deemed good enough for other media outlets. No original content, just pulling stories from other sources, changing a word or two to make it look like their own and hitting publish, to further enrage the braying idiots that comment on their output on there.

Journalism, it ain't.

pragmatic1

Ponster wrote: »

According to this link the UK owes us €133 billion (and we owe then €104 billion)

€390,969 debt per person. We dwarf every other nation in terms of debt. Scary stuff.

Doc Ruby

Robdude wrote: »

Thank you.

I'm starting to believe that 90% of everything I read is just crap written by someone whose goal was simply to write an article.

Welcome to the blogosphere...