Although the application of mercy (the particular choice of who and what) is left to the grantor, remember that mercy is not optional in general (like alms-giving; it is optional here and now, but required through life).
St. Thomas says:http://www.newadvent.org/summa/3030.htm
of all the virtues which relate to our neighbor, mercy is the greatest, even as its act surpasses all others, since it belongs to one who is higher and better to supply the defect of another, in so far as the latter is deficient.
The sum total of the Christian religion consists in mercy, as regards external works: but the inward love of charity, whereby we are united to God preponderates over both love and mercy for our neighbor.
and also (emphasizing that justice must be safeguarded when mercy is applied):
Hence Augustine says (De Civ. Dei ix, 5) that "this movement of the mind" (viz. mercy) "obeys the reason, when mercy is vouchsafed in such a way that justice is safeguarded, whether we give to the needy or forgive the repentant." And since it is essential to human virtue that the movements of the soul should be regulated by reason, as was shown above (I-II:59:4 and I-II:59:5), it follows that mercy is a virtue.
It would be a further argument to say that the individual is required to be merciful, but not the state.
In literature, I always think of inspector Javert in Les Miserables as a good example of one who loved justice without mercy, and he was a representative of the state. Mercy does look at the individual people, the degree of their guilt, their excuses, and their needs.