Why Europe Needs to Offer Greece Debt Relief
Greece’s debt-servicing costs are actually relatively low—lower than those of many other European countries. If the Greek economy could manage to grow at even a modest clip, it would have little trouble servicing its debt.
.. There has been a lot of talk of late about how “trust has broken down” between Greece’s government and its creditors. That sounds vague, but it refers to something quite concrete: the troika’s doubt that Syriza will take the necessary steps to insure that the country’s budget returns to a primary surplus and stays there. It doesn’t trust that the Greek government will improve tax collection, end the clientelism that has been characteristic of the country’s economy, or institute the structural reforms it thinks are necessary to improve productivity.
.. If you’re not convinced that the other side is trustworthy, you’re going to try to limit their scope of action as much as possible. It’s also one reason why Europe has taken such a hard line on further debt reduction: the bigger Greece’s debt, the more control Europe has over what Greece can do.