Headlines have lately focused on particular countries – Greece, Spain, Portugal – to discuss the current economic situation in Europe. I like this diagram because it is impossible to think of the EU situation from that one-country-at-a-time perspective. One currency, one tangled web of relationships. We also see that focusing on Greece could be considered short-sighted simply because Greece’s total debt is relatively small compared to, say, Italy which is a country we haven’t been hearing much about. Now, going back to my initial reason for liking this graphic, it’s important not to focus on one country. The adoption of the Euro was motivated by the robustness of networked flows and we see from the graphic that the problems of any one country should not bring it down but, if the cause of the single country’s problems are also putting downward pressure on other countries/nodes in the network, the cascade could be swift and deep. And the biggest losers are going to be France and Germany. Just look at all those arrows directing debt at those two countries. I am not an economist so I’m not making a prediction about the future of the EU economies or of the Euro as a stabilizing device.
What needs work
Because so much of the debt flows involve France and Germany, I think they belong in this diagrams as nodes. Or at the very least, one easy fix would be to show outgoing arrows to Germany all in the same color and to France all in a different color (like, say, the color of freedom).
Marsh, Bill. (2 May 2010) Europe’s Web of Debt. The New York Times, Week in Review Section from the intial source “Bank for International Settlements”.