Bundestag to torpedo a key element of the ESM deal

Wolfgang Münchau revisists the bond purchasing question

In his FT Deutschland column, Wolfgang Münchau argues that Germany shot an own goal by preventing the ESM/EFSF to purchase bond on the secondary market. Angela Merkel favours a voluntary restructuring of Greek debt - something that cannot conceivably work unless you provide an incentive in the form of EFSF swaps, for example, whereby banks and insurance companies can swap their Greek debt for EFSF bonds under some agreed terms, including a haircut. Without the incentive of swapping into a AAA-rated security, they will not do so, or will not do so on a sufficient scale. This means that Germany's preference for a voluntary restructuring is at odds with Germany's opposition to secondary market purchases.

This is what happens when you base your policy on talking points. The talking point of today may be in contradiction with the talking point of tomorrow, and then what?

Economics is politics by other means