[Caged Great]

The thing that gets me is that if german banks for example owe Italian banks money and vice versa, couldn't they just cancel each other's debt out and get it off the books?

Sort of like when you owe your friend 10 bucks and he owes you 10 just call it square.

I think that would help to get a lot of this on paper debt off the books and then you can work at clearing the rest off the books in short order.