If a haircut ends up being the only way to restore a country’s debt sustainability, taxpayers, rather than investors, would shoulder the bill. This does not exactly foster any willingness on the part of member states to agree to restructure a programme country’s debt.
Instead of a truly viable solution being reached, when push comes to shove, a strategy of muddling through would win the day. That’s why the Bundesbank is proposing to add a clause to the government bonds of euro-area countries which automatically extends the maturity of bonds by three years if the member state in question applies for ESMassistance.