Thursday, February 12, 2015

The Very Serious People are counting on compliant Greeks

Spiegel Online's reporting, with the notable exception of the columns of Wolfgang Münchau and Jacob Augstein, has been stuck in the broad but shallow conventional wisdom on the euro crisis shared by Angela Merkel's CDU/CSU and her junior coalition partners, the SPD.

The tradition continues with this arrogantly complacent piece by Gregor Peter Schmitz, Harte Landung für die Populisten 11.02.2015.

It seems to be a twin sibling of this column from Anatole Kaletsky, who is tripping if he expects the Greek government to step down in favor of EU "technocrats": Greece is Playing to Lose Project Syndicate 02/09/2015. Oddly, the link address says it's by Anatole Kaletsky but his name at this writing doesn't appear on the webpage itself. But I'm assuming it's by Kaletsky. Apparently, so does Schmtiz, since he quotes the article and says it's Kaletsky.

Both articles appeared before the agreement on Thursday to begin talks between Greece and the EuroGroup.


Giannis Varoufakis, neuer griechischer Finanzminister, gilt als eine Koryphäe auf dem Gebiet der Spieltheorie. Darin geht es etwa um die Frage, wie man bessere Verhandlungsergebnisse erzielt, indem man die Reaktionen seines Gegenübers mitdenkt.

Professor Varoufakis mag die Theorie beherrschen, in der Praxis ist davon aber wenig zu spüren. Seine ausgedehnte Europatournee nach dem Syriza-Wahlsieg war im Rückblick ein Lehrbuchbeispiel, wie man besser nicht verhandelt.

[Yanis Varoufakis, the new Greek Finance Minister, is considered an eminent authority in the field of game theory. In which it has somewhat to do with question of how one obtains better outcomes in negotiations if one takes into account the reactions of one's opposite number.

Professor Varoufakis may be a master of the theory, but in practice there is little of it in evidence. His extensive European tour after SYRIZA's election victory was in hindsight a textbook example, of how one does not negotiate better.]

Yanis Varoufakis, Greece’s new finance minister, is a professor of mathematical economics who specializes in game theory. But his negotiating technique – unpredictable oscillations between aggressiveness and weakness – is the opposite of what game theory would dictate. Varoufakis’s idea of strategy is to hold a gun to his own head, then demand a ransom for not pulling the trigger.

German and European Union policymakers are calling his bluff. As a result, the two sides have become stuck in a passive-aggressive standoff that has made serious negotiation impossible.
This starts to sound like a German Finance Ministry position parceled out to Very Serious Columnists and basically says, "Ha! These leftwing pipsqueak Greeks think they're going to tell us how to run their country? Ve vill crush zheir puny zelves!"

Of course, Schmitz expects Prime Minister Alexis Tsipras and Varoufakis to cave and do what they're told by their betters, and the EU can issue a joint statement with them saying, oh, we'll crack down on corruption and do a better job collecting taxes. And the EU will promise to be more respectful to Greece (snicker, snort!). And then Greece will obediently go back to further economic self-destruction via austericide.

Kaletsky thinks so, too, though he seems to be hoping the annoying Greek Keynesians will just step down and let Merkel run the place without bothering with all this here democracy nonsense:

Greece’s idealistic new leaders seem to believe that they can overpower bureaucratic opposition without the usual compromises and obfuscations, simply by brandishing their democratic mandate. But the primacy of bureaucracy over democracy is a core principle that EU institutions will never compromise. [?!?]

The upshot is that Greece is back where it started in the poker contest with Germany and Europe. The new government has shown its best cards too early and has no credibility left if it wants to try bluffing.

So what will happen next? The most likely outcome is that Syriza will soon admit defeat, like every other eurozone government supposedly elected on a reform mandate, and revert to a troika-style program, sweetened only by dropping the name “troika.” [my emphasis]
Good luck with that plan, fellows.

This kind of reaction is what is leading Paul Krugman to worry that the "Davos set" of Very Serious People running the EU may be dumb enough to crash the eurozone over Greece's anti-austerity demands. (Greece: The Tie That Doesn’t Bind 02/09/2015)

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