Now is no time for debt relief

The eurozone’s perennial problem child, Greece, urgently needs an additional $ 95 billion in outside financing. The only parties to even consider ponying up that kind of cash, some 40%- 50% of Greek GDP, are the other countries in the eurozone. They’re rightly skeptical, as they’ve bailed out Greece twice before.

Since the financial crisis exposed Greece’s fiscal situation as much worse than previous governments had pretended, the Greeks have received $ 250 billion in loans from Europe and the International Monetary Fund, on conditions they have violated time and again.

Voters in the creditor countries, many of whom were promised no more bailouts by their own leaders, are worried that their taxpayer money is going down the drain. To address those concerns, the eurozone countries, led by Germany and Finland, have produced a set of conditions Greece needs to meet to receive more money.

They range from budget deficit goals to structural reforms. The goal of these conditions is to ensure that Greece can meet its obligations and that it will ultimately be able to stand on its own feet while remaining in the currency union.

This will not be easy for Greece; tough times remain ahead. Many of the special interests that enjoy protection from competition and preferential tax treatment will take a hit, and so will those who rely on the public sector for income and support.

That said, now is not the time for debt relief. The only leverage creditors have over Greece is, in a sense, precisely that the country continues to be in financial dire straits. Instead of forgiveness, what the eurozone countries could offer is flexibility.

They could draw up a list of conditions “worth” more than $ 95 billion, and assign points to different reform measures. Greece can then exercise autonomy and adjust to changing political and economic circumstances by picking and choosing from that list.

Additionally, such a system would give its creditors, in particular the taxpayers who are ultimately footing the bill, the chance to keep track of what Greece is doing to merit their continued trust.