Finance Minister Schäuble remains undeterred. As early as 1990, when he negotiated against the advice of almost all economists as chief negotiator for the German monetary unification the disastrous exchange rate of 1:1 and defended, it is also now self-assured over the fact that his plans for a bail-out of Greece from the overwhelming majority of economists are rejected.Even the economists are not convinced, even now, at least to the citizens and voters will be impressed. Domestic and foreign public figures be summoned to appear the project in a good light. Even the Parliament is switched to legitimize the guarantee by law and in summary proceedings.
In order to attract
The doubting citizens to their side, the federal government now changes the argument. Was it on 25 March in the Declaration of the European leaders still, the subsidized credit was “regarded as a last resort, which means in particular that the financing of the market is not sufficient,” it is already put together a package, although Greece's new emissions has always been on the market can accommodate. It was originally, it would prevent a resurgence of the financial crisis and help the needy Greeks, then Finance Minister Schäuble warned now, without a German contribution to the financing of the Greek household, the stability of the euro was in danger. The draws for the Germans, he thinks – but it's true
The stability of a currency depends on money supply and money demand, because the price level is determined in the long-term money market. Money demand is determined primarily by income, assets and interest. How would the money demand for euros change if Greece's maturing government bonds could not repay, but would have to refinance, extend the maturity of its debt that is in agreement with the creditors would?
The price of the bonds would fall, so that the owners of the bonds would suffer financial losses. As far as the bonds held by banks, these banks would have to provide for depreciation. It is possible that one or the other bank – as in the past – would be supported by the State.
If the other euro countries Greece instead – despite the bail-out prohibition of Article 125 TFEU – enough to grant subsidized loans or guarantees, Greece remains the rescheduling of its creditors and the loss of property saved. But the total assets in the euro zone, on which depends the money demand for euros is, therefore, not less. For such loans or guarantees may distribute the assets just different, away from the taxpayers of the other euro countries and towards the creditors and the citizens of Greece. A significant wealth effect on the € money demand is not expected of them.
Something else presents itself, to the extent of Greece's debt service is not funded by other euro countries, but the International Monetary Fund. If the IMF and non-euro countries – above all the USA – participate in the financing, assets are transferred to the euro area, so that the money demand for euros, the price increase is attenuated and enhances the euro. However, these effects would be minimal.
Dignity trigger a Greek rescheduling a negative income effect that reduces the € money demand and increases the price increase? Apparently, Mr Schäuble fears that a debt restructuring would again cause a panic and recession in Germany and Europe. This is not to be expected. If it were otherwise, would hardly be the vast majority of economists – those who are the future economic development can best placed to assess – against his bail-out plans call.