The problem in Europe is not purely a debt problem. If it was we would be hearing about the UK defaulting because they have higher debt ratios then Spain and so on. This is why Dr Oliver is advocating aggressive bond buying in the troubled economies.
Under normal circumstances, when a country faces default risk like the PIGS are currently investors sell their bonds and money market securities. As a result the price goes down and the yield goes up making debt more expensive like is happening now. However, at this stage in countries not part of economic unions investors have no need to hold the currencies and so those same investors sell the currency of the country and it devalues making exports more attractive and it acts as a stabiliser to grow their way out.
In Europe currently, investors are selling the bonds of the PIGS but keeping their money in euros and just buying German Bunds resulting in a situation where the cost of debt increases but the currency remains stable. This large selling in the Bonds markets also cause liquidity risks as people move their money out of the countries money markets which is why Dr Oliver wants cheap ECB rates for those troubled Banks that have had capital moved.
Also when we a are talking about countries defaulting inflation is the last thing to worry about. Deflation is a very real possibility which is why he state needs to intervene were the public is no longer participating otherwise we will have a repeat the mistakes made in the early 1930's. If Europe and USA were to simply start paying down govt debt private debt would remain the same but unemployment rises and real wages decrease causing deflation. No when spends during these times and aggregate demand plummets causing recessions. We need government stimulus.
This idea that governments should behave the same as businesses and the private sector during tough times and save is garbage and would see us repeat the same mistakes of the early 1930's.
