A “haircut” would involve forgiving part of Greece’s debt, which would result in losses for taxpayers and bondholders in the eurozone and worldwide. Or Germany could restructure the debt by lowering the interest rates and extending the time Greece has to pay back the money.
But either would be a tough sell for Mrs. Merkel.
“I don’t think policymakers will be able to explain to the public that we have an actually loss of money,” Mr. Fichtner said. “Previously, they were saying, ‘We are just lending money to Greece, but we will get it back.’”
“I would expect that the third bailout would probably not be the last one,” he added.
It’s something that Mrs. Merkel would rather not think about at the moment as she campaigns for her third term.
“You can sell these tough decisions after you have won the elections and are in office again,” said Annette Heuser, executive director of the Washington office at the Bertelsmann Foundation, a German think tank. “That’s the window of opportunity, and there is no doubt that Merkel will use it.”