GREECE’S ADVANTAGE IN THE CHICKEN GAME. One advantage that Greece has in the negotiations with respect to a possible Greek default is that Greece’s moves will not be required until after the deadline. The deadline for the funding from other institutions that is needed to prevent a default on Greek debt is in March. The spending and other economic reforms that Greece is being asked to make would be made in the future. Thus far, in previous bailout negotiations, the Greeks have promised reforms, but haven’t made them. Now, with very little time to go before the deadline, as this AP article reports, Germany is asking Greece to “temporarily cede sovereignty over tax and spending decisions to a powerful eurozone budget commissioner before it can secure further bailouts, an official in Berlin said Saturday.” The impetus for the German demand is that: “During every verification mission last year, the troika found huge implementation shortfalls….”
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Greece seems to me to be playing a game that Karl Deutsch called “underdog.” While one might think that the “top dog” would always win, the “underdog” can employ a very costly strategy to itself that also imposes more costs on the “top dog” than it wants to incur. So to elicit cooperation from the “underdog,” the “top dog” (Germany, the EU, or banks) would make greater concessions than their relative power positions might suggest to be necessary or appropriate.
That makes sense. It reminds me of the stories Pater Familias would tell me about how in Boston the person with the cheaper, more beat-up old car would always have right of way because someone with a nice car would never risk damaging it.
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