Would it be possible for him to give me a 10 EUR bill in meatspace and somehow reflect this "settlement" into the ripple system?
I think if he gives you a 10 EUR bill in meatspace, you use the ripple system to send him 10 ripple-Euros. From his and your point of view, everything is settled.
Duh! Thanks for the kick. Yes of course, it's that simple.
I think I really need sleep now.