Creditor-nations must give Greece some breathing room

We need more money and soon, says Greece. We have no more to give, counters Germany. In a nutshell, that was pretty much the result of a tense meeting between the finance ministers of the two countries late last week. The two nations are far apart over Greece's debt financing after the electoral victory of Alexis Tsipras, the new prime minister, and Syriza, his left-wing, anti-austerity party.

Perhaps the meeting, which did not even discuss Greece's massive national debt, could be called a success simply because it did not degenerate into a shouting match between the financial representatives of the euro zone's largest creditor and its worst debtor. German Finance Minister Wolfgang Schauble said the two sides "agreed to disagree", while Yanis Varoufakis, Greece's new finance chief, said they didn't even achieve that.

Yet, there can be no debt financing without Germany's consent, and the euro zone crisis will not end without a resolution of Greece's massive debt. The stakes are therefore high and the clock is ticking: the current rescue programme for Greece expires at the end of this month. From Greece's viewpoint, its current debt situation is not only unjust but counterproductive. The bulk of the bailout money from the so-called troika - the European Commission, the International Monetary Fund and the European Central Bank - has not been used for Greece to rebuild its economy but simply repay the interest and principal on past loans. A more cynical way of looking at it is that the rescue has been of the big banks of the creditor-countries while ordinary Greek citizens suffer under troika-imposed austerity. So why not restructure the debt, relax austerity measures, and give some space for the Greek economy to grow, argue Tsipras and Varoufakis.

Germany doesn't see it that way: after faking economic data, Greece joined the euro zone and enjoyed years of cheap money. Now the party is over. Debt has to be paid, and Greece has no one to blame but itself. At this point, the realists jump in. Regardless of the rights and wrongs, there is no way Greece will ever repay in full its €315 billion (HK$2.76 trillion) debt pile. At some point, a debt restructuring is inevitable and the creditors will have to take a "haircut" on their loans. You can punish Greece all you want. That might appeal to German taxpayers. Or you can give it some breathing space to recover from a deep depression and repay more of its debt in future.