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Monday, January 26, 2015

Dan Davies : Greek games and scenarios — Crooked Timber

Greek games and scenarios — Crooked Timber
As a strategy (SS. the nuclear button) it is …cute. I think it might even have worked if tried three years ago; as far as I can tell, something like it was the unspoken threat under the table which led to the restructuring of the Irish bailout liability. You can see that it’s a blackmail game that is best played by a left-wing populist, because in order for the threat to be credible, it needs to be made by someone who is not susceptible to apocalyptic warnings and who is even prepared to dice with the prospect of actual bank runs. I can entirely see why it’s attractive to Syriza and why Tsipras has made it a constant theme of his recent rhetoric that Greece is in a stronger negotiating position than it realises.
...
my guess is that Tsipras’ strategic chain described in section 4 above breaks own pretty early on – the ECB and the Eurosystem structure don’t think that he’s got a credible threat of being able to cause the kind of chaos that could lead to the Euro entirely breaking up. So game over? I think not because there are two further strategic wrinkles.
i.Although Greece can no longer destroy the whole Euro, they could certainly create a situation in which they end up being forced out themselves. This wouldn’t be disastrous, but it would be annoying for the Eurosystem bureaucrats....
ii.And given (i) above, it matters that Tsipras might not be aware that he is bluffing a pair of deuces. If he genuinely believes that the Eurosystem will give in, it is in his interests to create a situation in which Greece could end up being forced out of the Euro, even though this is an outcome that nobody actually wants.

iii.And of course, even if Tsipras understands that the game is up for the strategy in section 4, it’s in his interests to pretend otherwise. 

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