

Europe's Web Of Debt - arunabh
http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html?src=ISMR_AP_LI_LST_FB

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mikemoka
The diagram, as others have said, is old, here is probably the most updated
version:

[http://www.thepeakeffect.com/2011/09/europes-web-of-debt-
upd...](http://www.thepeakeffect.com/2011/09/europes-web-of-debt-update.html)

no mention of sources though.

~~~
sixtofour
I believe the graphic you link comes from here:

<http://www.eudebtwriteoff.com/>

That is a site put up by one of the authors of a report exploring the idea
that the PIIGS should write off their mutual net balance debt: if I owe you
$10, and you owe me $2, then we strike the $2, and I owe you $8 while you owe
me $0, reducing loss by friction. That report (pdf) is linked from the site.

I found that site by searching for the filename of the image (EURBEF.png), and
looking for a post or article that uses it and cites its source. This is one
such post:

[http://www.zerohedge.com/news/european-sovereign-debt-
cant-w...](http://www.zerohedge.com/news/european-sovereign-debt-cant-we-all-
just-net-along)

~~~
mrb
This is shocking. A simple, error-proof, accounting move with zero side
effects... What are we waiting to do this?

~~~
sixtofour
Some people make money from friction.

~~~
mikemoka
It's way more complex than that. The debt includes private and public
institutions, and countries from outside Europe.

------
donaldc
For me, the most shocking thing in the web is that Ireland and its banks owe
$867 billion. That's approximately $188,000 for every man, woman, and child in
Ireland.

~~~
dhughes
Ireland has (or had?) a pretty good economy too with well paying aerospace and
other tech industry jobs.

~~~
barry-cotter
Not that many although the tech industry doesn't seem to be going anywhere
thank fate. Still, it's not like those jobs are even theoretically available
to more than maybe a quarter of the population. One thing that surprised me
when I read it[0] was the huge difference in profitability of domestic and
multinational firms in Ireland per employee in the same sector. Twice as
productive, _twice_.

[0][http://www.gillmacmillan.ie/economics/economics/economy-
of-i...](http://www.gillmacmillan.ie/economics/economics/economy-of-
ireland-11th-edition)

~~~
barrkel
This is largely a product of booking European profits through Irish
subsidiaries. (Irishman myself, FWIW.)

~~~
dhughes
Google's European head office in Ireland would be a great example of that, as
well as the shell office in The Netherlands.

------
mrb
This diagram is 1.5 years old (May 2010). How much has changed since then?

~~~
nakkiel
I can't find that article anymore but a few days ago I read an article showing
that since August, French banks have largely reduced their exposure to other
European countries' debt. By largely I'm speaking of figures ranging from 40%
to 80%, depending on the Bank.

What was more disturbing in that article is that it clearly shows that the
activity of those banks is still very sane and that they made profits and all
indicators are green even through the last few months. In other words, besides
market speculation, nothing justifies the 20% drop of the CAC40 or 50% drop
for certain groups (Carrefour is now worth less on the market than their
assets).

I'll reach back when I find the article.

Edit: I believe it's this article, but it's now behind a paywall:

    
    
      http://lecrible.lesechos.fr/?Assurance-vie-transparence-et

~~~
enqk
"Carrefous is now worth less on the market than their assets"

Maybe equity value drop is predicting a drop in asset value?

~~~
nakkiel
I'd say that their assets in China only are worth more than this. Carrefour
has literally withdrawn from Thailand (they had a large and well placed fleet
of shops and a good reputation) to invest everything in China. They had long
been in China before that but that's just to give an idea of how seriously
they take the Chinese market. Their strategy is to be fully implemented
throughout the country when the middle class fully emerges. If such a middle
class ever emerges, they will be terribly wealthy.

~~~
muhfuhkuh
Which is why Walmart et al. are _desperately_ trying to build brandshare
there. They don't want to be left out of the China frenzy and "stuck" with the
reliable old US embarrassment of riches.

------
puredemo
What countries are running surpluses?

~~~
mkuhn
Switzerland. It also introduced a "debt brake" in 2003 [1].

Seeing where we stand now this was quite a visionary step. Switzerland paid
for it with slower growth etc. but is now one of the countries with the
healthiest Budget (a feat especially considering Switzerland does not have any
natural resources) and one of the few (besides Singapore and Norway I think)
that is not in danger of losing its Triple-A ratings.

[1]
[http://en.wikipedia.org/wiki/Balanced_budget_amendment#Switz...](http://en.wikipedia.org/wiki/Balanced_budget_amendment#Switzerland)

~~~
enjoy-your-stay
Unfortunately Switzerland didn't manage to dodge the bullet entirely.

Many people saw the Swiss Franc as a safe haven currency and massively bought
them up, driving up the exchange rate. This caused Switzerland's exports to
become uncompetitive which is also slowing what is a very export driven
economy.

Oddly enough prices haven't really come down domestically either, but neither
has unemployment risen that much (despite large layoffs in the financial
services sector, particularly in their biggest banks, UBS and Credit Suisse).

~~~
zipdog
Yes, in September this year the Swiss bank took the almost unprecedented step
of announcing it would print currency at 'any amount' in order to maintain
something like 1.2 with the Euro. Having a huge volume of money seeking safe
haven in Swiss Francs has all sorts of destabilizing effects.

------
Tichy
Sadly most edges seem to be rather one-way - otherwise it might have been a
fun exercise to cancel everything out.

~~~
forrestthewoods
Given that it's not entirely one-way why can't it be partially cancelled out?
Sure it wouldn't go the distance but why is that step not made?

~~~
ianpurton
The debts are probably government bonds with different maturities and interest
payments being held by different banks.

I'm not sure where the information from this diagram comes from because I
didn't think a banks exposure to different countries was public knowledge.

~~~
justincormack
That data was released as part of the European bank stability tests. You can
get the spreadsheets here [http://www.eba.europa.eu/EU-wide-stress-
testing/2011/2011-EU...](http://www.eba.europa.eu/EU-wide-stress-
testing/2011/2011-EU-wide-stress-test-results.aspx)

Historically it was not available.

------
perlgeek
It would be interesting to see the per-capita debt additionally to the total
debt.

~~~
Someone
per-capita debt as a fraction of per-capita income or possessions would be
more interesting; a millionnaire or someone with a solid 200K income with a
100k mortgage is not a problem.

------
johnbatch
The source is from Bank for International Settlements, which has a nice
interactive web app for doing your own analysis. <http://stats.bis.org/> The
data in this table is almost a year and a half old.

------
chrismealy
Be a lot better if Germany, France, and the US were on there. You'd see how
tiny Greece is in the big picture. A lot of people are going to get hurt just
to teach a few Greeks a lesson.

~~~
RockyMcNuts
It's gotten bigger than Greece... if the recovery was intact it would just be
the weak countries like Greece that couldn't pay their debts, if the economy
dips then the big countries like Spain and Italy can't either. It turns into a
death spiral, the more people panic over the crisis, the worse the economy
gets, the more countries are at risk of default.

Meanwhile, German economic policy essentially consists of:

    
    
      1) Tight fiscal policy to crush any signs of a recovery.
    
      2) Tight monetary policy to crush any signs of recovery.
    
      3) Tie yourself to some profligate countries so that you have a cheap exchange rate
       and can sell s***loads of exports.
    
      4) When the countries you provided vendor finance to start having trouble paying 
      you back insist that they follow 1) and 2).
    
      5) Wonder why everyone hates you.
    
      ..."It's a pulley system - you throw everyone over the cliff and let the rope
      take you higher. But eventually you reach the pulley."
    

[http://macro-man.blogspot.com/2011/11/raising-dead-and-
axis-...](http://macro-man.blogspot.com/2011/11/raising-dead-and-axis-of-
evil.html)

reminds me of Air France 447, the people running the show initially reacted by
pushing the stick in the wrong direction, they're still way behind the curve,
by the time they react with sufficient force, might be too late, crash of
markets, governments defaulting, countries abandoning the Euro.

~~~
DuncanIdaho
For one I believe that Germans know what they're doing. They might be a little
bit too bent on saving Framany's banks - however if these banks drop then
Framany drops. If that happens Eurozone has no steering wheel and no engine to
get anywhere.

So in fact it is essential that in eurozone:

1\. Germany and France be saved from the worst. 2\. Germany and France beat
the other juvenile countries into fiscal submission. 3\. The new "germanized"
europe lifts itself out of ash.

Whatever people think, the whole point of eurozone is "germanization" of
Europe. It's not as some people state that Germany is trying to occupy the
Europe. The fact is that Europe wants to occupy Germany. Thats the whole
point, the whole Europe and its citizenry would like to live in Germany.

And Germans know full well what they're doing - I'd even dare to say that they
know what they're doing even better than 'mericans. Don't forget that Germany
annexed DDR 20 years ago and that DDR was in much worse shape than any of
PIIGS. Alo Angela Merkl along with many people in charge, grew up in DDR.

~~~
danieldk
_Thats the whole point, the whole Europe and its citizenry would like to live
in Germany._

That's nonsense. The German welfare and pension system is really bad compared
to e.g. The Netherlands and Scandinavian countries (which are doing fine
economically, by the way). Besides that, Germany doesn't even have a minimum
wage.

To us, Germany means: potentially bad income when you work (no minimum wage),
bad income (Harz IV) when you are long-time unemployed, and bad income when
you retire (compared to e.g. The Netherlands where you do not only get
whatever private pension you build up, but also a decent state pension).

Citizens of EU states are free to move to and work in other EU states. So, if
your point were true, we'd see lots of immigration to Germany. Which isn't the
case.

~~~
DuncanIdaho
I guess I went wrong when I said Europe instead of European periphery (East
and Mediterran, or he so called New Europe). Since the France, Benelux, North
and Germanic states (the Old Europe) already share much more of the same
values and outlooks towards business and civic responsibilities.

And I didn't mean that these peripheral people are all looking to move to
Germany and eat Bratwurst and drink Beer, while reciting Goethe and enjoying
Shit German Welfare. By the way, calling German welfare bad is absurd and
completely a matter of political and personal convictions. Some of our US
friends here would call German welfare socialistic and dangerous (?).

There are also other reasons why people don't emigrate - language and cultural
barrier is key here. Romanians and Bulgars are migrating to Italy, due to
language and cultural similarities. Polish are migrating to UK - since new
generations apparently speak better English than German, etc. If more people
spoke German, then you would see much more emigration to Germany, hell you
don't even need to migrate for the most part. Being able to get business
connection with Germany going on a personal level is more than enough for one
to get going.

What I mean is that New Europe would want more of Germany (or Old Europe) in
their own countries. And by that I mean an judicial systems that work.
Government that actually offers some services beyond employment for the
unemployable and privileged. And system where hard working people are
protected from scores of predators. This is the gist of problems that Europe
is facing currently. As far as Greece, Italy and Spain goes - its not the same
as the CDS crisis in US. The problems that led to current state of affairs
have been well know for a long time, but have not been acted upon due to
ignorance and systemic corruption on the part of these weak countries.

~~~
PedroCandeias
People from outside europe (which I suspect you are) have this annoying
tendency to over simplify things. You can't neatly split europe into "new" and
"old". Also, check your dates: what you're calling "new europe" actually
joined a decade before the scandinavian countries.

I'm sorry, but you sound like all you know about europe is what's been airing
in the news for the last year. You call the spanish economy "weak", when in
fact it's the 5th largest. Italy is the 4th.

Please check your facts. A few good comments about the judicial systems aren't
enough to offset having an argument that stands entirely on stereotype and
pulp news.

~~~
DuncanIdaho
I am from Europe (Slovenia) and between me and my milieu we have put our feet
on all of European countries.

My division is not geopolitical, it is more of an cultural division.
Protestant vs Catholic would be a starting point of two bigger blocks.

I haven't called Italy and Spain economically weak. However they are weak as
far as civic virtues go, work and business ethics also leave a lot to be
desired. When confronted with these issues people usually go and play the
"meiterranean melos" card. When in reality these countries are likely just
failing to cultivate a sense of personal responsibility in the citizenry and
institutions.

~~~
escanda
You'd perfectly call, at least Spain's, economy weak as it is not growing
because a correction period. Spain had to reform its subsidized industries, a
considerable mass of low specialized workforce and a sub par infrastructure
network in the 80s. It has succeed in most of them, but the welfare state has
been paid taxing a housing bubble which has popped. So although it has stopped
growing, in volume it's strong, and its past performance has been quite good
considering where it started.

------
wavephorm
The more I read and hear about the debt problems of the Eurozone, I wonder how
France and Germany ever got duped into joining in the first place.

~~~
jvehent
They didn't join anything. They created it to extend their markets with a
common currency. The others joined in.

~~~
kleiba
Well, it wasn't Germany and France alone who created the Euro zone...

~~~
kleiba
Oh, wow, I got quite a bit of downvotes for simply stating a fact: the
Eurozone has been around since 1999, and 11 states of the EU were founding
members. Germany and France were among them, sure enough, but they weren's the
only ones.

~~~
Confusion
Don't be naive. Without either of them actively promoting and wanting it,
there wouldn't have been a Eurozone. Any other country could have dropped out,
but neither of these.

~~~
kleiba
Not sure were you get any naivite from my post. It's not like Germany and
France decided to create a new currency and a few bystanders hopped on board.
It was a very complicated and long process, and yes, the German reunification
was at the heart of it, 10 years before the Eurozone actually came into
existence. Even the US and Russia played key roles in the process.

I do get where you're coming from though, since Germany and France have been
the motors of the EU's economy. Fair enough.

But the original claim from the ancestor was that Germany and France created
the Eurozone and others joined later. That's simply factually untrue.

Anyway...

