The Great EU Debt Write Off

14 Pages Posted: 27 May 2011 Last revised: 26 Aug 2012

Anthony J. Evans

ESCP Europe; ESCP Europe - Department of Economics

Terence Tse

ESCP Europe

Date Written: Aug 24, 2012

Abstract

When one economic entity is both a creditor and debtor to another, a somewhat obvious and simple idea is to cross cancel their debt. We created a classroom simulation where students were required to research the debt position of 8 EU countries (Portugal, Ireland, Italy, Greece, Spain, Britain, France and Germany) and then conduct a negotiation exercise to reduce their total debt burdens. As a result students developed their research skills and data analysis, and increased their understanding of the data regarding an important topical issue. The simulation itself exposed students to a number of different trading strategies, in particular the complexity of going from bilateral to wider deal making, and negotiating from weak positions. By making students the focus of the exercise their engagement and learning outcomes were high.

Keywords: sovereign debt crisis, cross cancellation, write off, simulation

JEL Classification: A23, F34

Suggested Citation

Evans, Anthony J. and Tse, Terence, The Great EU Debt Write Off (Aug 24, 2012). Available at SSRN: https://ssrn.com/abstract=1847506 or http://dx.doi.org/10.2139/ssrn.1847506

Anthony J. Evans (Contact Author)

ESCP Europe ( email )

79 Avenue de la Republique
Paris, 75011
France

HOME PAGE: http://anthonyjevans.com

ESCP Europe - Department of Economics ( email )

United Kingdom

HOME PAGE: http://anthonyjevans.com

Terence Tse

ESCP Europe ( email )

79 Avenue de la Republique
Paris, 75011
France

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