Article published by José Alberto León Alonso in El Día on 02/15/15.
Game theory is a branch of economics that studies decisions in which for an individual to be successful they have to take into account the decisions made by the rest of the agents involved in the situation. In game theory we don't have to ask ourselves what we are going to do, we have to ask ourselves what we are going to do taking into account what we think others will do, who will act thinking according to what they think our actions will be. Game theory has been used in many business, economic, political decisions or even to win playing poker.
Greece's current confrontation with the EU seems like a typical game theory problem. The new Greek government has entered the scene by announcing that it will not seek an extension of the current bailout that expires on February 28, which puts it directly at odds with its creditors. If he really carries it out, his country will end up outside the euro and with an Argentine-style financial corralito to prevent capital flight, since its banks cannot survive without European help. It may be a typical game theory bluff. The Greek government is playing a solution in which Greece voluntarily abandons itself, but puts the euro zone in difficulties. It is a solution in which both Greece and the EU lose, so it seems better to find a cooperative solution, in which both sides win more than they lose. Greece would see the conditions of its rescue softened, it would not be subject to the surveillance of the hated troika, but of each of the lending institutions separately (ECB, IMF and European Commission), which is still a formal and symbolic aspect, but it would continue with the reforms that its economy needs and with the containment of public spending, so that the EU would not face the instability that Greece's exit from the euro would generate. Establishing the hypothesis that both the Greek government and the EU governments seek the best for Greece and its countries, in accordance with game theory, this seemed to be the most likely solution until a few weeks ago and hence the calmness of the markets with the victory of Syriza in the Greek elections.
However, it seems that the new Greek government could be making the serious mistake of seeking confrontation with Europe, and its negotiation strategy is being counterproductive. First he presented a plan that in practice meant non-payment of the debt. He then provocatively refused to negotiate with the troika, when the three institutions that comprise it are clearly more understanding of Greece than Germany, which has now taken the helm of the negotiations. And he subsequently rejected the extension of the current bailout, whose three-month extension seemed guaranteed simply by appearing to have a conciliatory negotiating stance. As a result, they have recklessly brought forward the date of withdrawal of ECB financial support to February 28. From then on his problems will begin.
What is failing? Greece's fledgling new rulers seem to believe they can sidestep the problems they face simply by brandishing their democratic mandate: The Greeks have elected them to end the bailout, and Greek sovereignty is not up for discussion. In reality, the starting hypotheses of this particular “game” are different from those presented. Thus, if we assume that the new government of Greece does not act guided by the well-being of its country, avoiding exit from the euro, but for the good of its government, which would fall if it does not keep its electoral promise to end austerity, increasing public spending to 8% of GDP, then the most likely solution will not be a new somewhat more advantageous bailout, but rather maintaining its sovereign decision... to lead Greece to ruin, since for the EU it is clear that the only thing that could really break the euro is that a country he broke the rules and others copied him. And the fact is that, putting partisan interests before those of the country, no European leader has a real interest in helping the Greek government, because it would have a significant electoral cost among their respective voters and would help the proliferation of populist movements throughout Europe. In the same way that Greek voters have sovereignly elected a government that has promised them more public spending with European money, European voters, also sovereignly, reject continuing to finance the public spending of other countries with their own taxes. It is the problem of making electoral promises with other people's money and without their approval.
Greece insists that its debt is unpayable, but in reality currently the conditions are so beneficial that even with 70% more total debt than Spain, they pay less interest (2.5% of their GDP) than Spain (3.1% of their GDP) for it. The bad thing is that Syriza has made an electoral flag of this issue, when what really pressures the Greeks is the demand that Greece register a budget surplus before paying interest of 3% of GDP in 2015 and 4.5 in 2016. Relaxing these demands to 1.5-2%, for example, would be feasible, but if partisan interests in Greece end up having more weight than national ones and insist with debt restructuring the game will end badly, and this option is gaining possibilities with each new statement from the Greek government. If, despite everything, common sense prevails, Syriza will end up doing very little of what it promised in the electoral campaign. There will still be bailout, conditionality and troika but they will be called differently. The fiscal adjustment will continue but softer, and the reforms will continue. And the anti-system strategy gives popularity and votes, but it is not useful for governing.
U!
