Five ways to save Europe

Simon Tilford, chief economist of the Centre for European Reform, believes that Europe will eventually have to write off about half of the debt of countries such as Greece and Ireland. "Far from improving access to the financial markets, the support packages for Greece and Ireland have left these countries facing record borrowing costs," said Tilford. "The markets do not believe that the struggling euro countries are going to grow rapidly enough to service their debts. "The outlook for Portugal is similar, notwithstanding the slightly less draconian terms of its agreement. Initially, the EU will no doubt try and get away with 'soft' restructurings, involving a combination of longer maturities and lower interest rates. But this will not work and by 2013 there will be no viable alternative to 'hard' restructurings (default) comprising debt write downs of 50 per cent or more. "Unfortunately, in the case of Greece and Portugal at least, even this will not guarantee continued membership of the euro."