For anyone wondering why Europe’s leaders are so determined to avoid a restructuring of Greek sovereign debt, I recommend a remarkable piece of research published on Monday by Jacques Cailloux, the Royal Bank of Scotland’s chief European economist, and his colleagues.  (Unfortunately, it seems not to be easily available on the internet, so I’m providing links to news stories that refer to the report.)

The RBS economists estimate that the total amount of debt issued by public and private sector institutions in Greece, Portugal and Spain that is held by financial institutions outside these three countries is roughly €2,000bn.  This is a staggeringly large figure, equivalent to about 22 per cent of the eurozone’s gross domestic product.  It is far higher than previous published estimates.  It indicates that, if a Greek or Portuguese or Spanish debt default were allowed to take place, the global financial system could suffer terrible damage. Read more