Dealing with delinquency

Greek opposition: Euro zone leaders are understandably unhappy that Greece’s main opposition party won’t sign up to the country’s austerity programme. They may also be surprised that a conservative party won’t agree to fiscal rectitude in exchange for vast sums of money.

But, it would be foolish to deny Athens bailout cash on account of the opposition’s delinquency. That would provoke mayhem that the rest of the euro zone isn’t yet ready to withstand.

It might therefore be thought that euro zone leaders can only express empty wishes for national unity, as they did at last week’s summit. But they are not that helpless.

So long as the current prime minister, George Papandreou, can secure a parliamentary majority this week for the austerity programme, Greece should receive the next 12 billion euro tranche from last year’s euro 110-billon bailout deal. His government’s term does, after all, have just over two years to run.

But Greece’s new bailout programme, which has yet to be finalised, is a different matter.

It’s supposed to handle all Athens’ funding needs until end-2014 and involve maybe euro 120 billion in cash — albeit half of that coming from privatisation receipts and cash from private creditors rolling over their lending.

That would finance Greece a good year beyond the next scheduled election.

It would, therefore, be reasonable for Athens’ saviours to say that they will only do a two-year deal with perhaps euro 60 billion , unless the opposition signs on. They could also warn the interest rates wouldn’t be that generous either.

Presenting the Greek opposition with such a choice might conceivably nudge them into supporting the programme by showing that bad behaviour has a cost. Even if it didn’t, a deal that lasted only until mid-2013 would clearly signal that Greece’s debts would be restructured before then.

And that would give the rest of Europe yet another prod to get its own act together quickly so it can withstand the default when it comes.