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“If you want to make its debt burden sustainable, there will have to be some kind of debt forgiveness and restructuring,” so said Jörg Krämer, chief economist at Commerzbank in Frankfurt, about Greece in an article in the New York Times.

And he is totally right. As bailout countries like Greece faced a sharply shrunk economy, all the efforts to contain spending and the debt pile can only achieve damage limitation, but not the bloating of deficits.

But what commentators need to consider is how best to write off the debt. A simple debt forgiveness, after three years of pumping EUR500bn of direct aid to bailout nations and another EUR1.5tn in various liquidity measures and debt buybacks, seems likely to be very unpopular with electors in donar countries.

But as I have argued before, a debt write-off in exchange for an asset write-down could be the fair way to remove the entire debt burden. After all, what does debt forgiveness mean? It means the donors who sacrificed resources since 2009 will now be told that they have to accept the money is “lost”. Hence the debt in effect falls back on the donors. It is not really written off, just passed on.

An asset write-down would ensure a like-for-like exchange. It is a concept I have recently urged in this blog.

For the entire New York Times article, I refer you to click here.