What would you do: Part 2, the Island of Surpyc

Welcome! Once more, I’m trying to help people understand how policies get made from the inside, and how something that looks like a dumb idea can often be the best choice out of a bad decision set, in the context of the ongoing Euro crisis. The last one was pretty didactic, in that I was aiming to steer people down a path to the decisions I thought were being under-rated. This time, what strikes me about the Cyprus policy agenda is the sheer amount of uncertainty and ambiguity; nearly every idea could end up succeeding brilliantly or failing horribly. So this time round, I’m introducing a large element of chance.

In this episode, as in the last one you are once again a representative of the Secret One World Government, and you have been temporarily flown in to pull the strings in the island of Surpyc, which is currently experiencing a bailout crisis…

In this game you will need two dice. At various points in the game, chance will govern the outcome. When instructed to roll the dice, you should follow the accepted methodology:

1. Check both outcome to see which is the good one

2. Decide whether you really think you deserve a bit of good luck, whether I was wrong in setting the probabilities, in general whatever rationale for picking the good outcome you can think of

3. Go back later and see whether the bad outcome was really gruesome.

Certainly, anyone trying to play it properly is going to cause me to doubt their sanity. I’ve tried to make the probabilities match up in a sort of broadly cardinal way, so that the really unlikely strategies are longshots, and the stuff that I think should probably work is about a two-to-one on. But really, assigning well-defined dice-roll probabilities to the outcomes of a complex and political process is usually a pretty bad idea unless you’re absolutely clear about what you’re doing, and that you’re in no danger of fooling yourself or anyone else that your probabilities have any basis at all in reality. Basically, I would live in fear of my signed copies of “Antifragility” and “The Black Swan” spontaneously combusting if I thought anyone was likely to take the probabilities implied below as anything other than a joke (albeit not a cheap joke, this took a whole bloody evening to do). On the other hand, there is a strong element of “Fooled by Randomness” in it, as there is literally no policy, however stupid, that can’t end up doing at least all right (and often better), and even the best ideas have a strong chance of ending up going to hell.

1.

Saturday evening

“I didn’t expect to see you again”. There’s a somewhat awkward silence between you and the occupant of the room, who is sitting on the edge of a desk drinking tea. It’s Maynard. “We didn’t part on the best of terms”.

“No, we didn’t”, he replies, guardedly. “And the fact that we’re back here working together shouldn’t be taken as a good sign. Either for our own careers, or for the problem itself. This situation has landed on our desks precisely because everyone with enough clout to wash their hands of it has done so.” He points to the tablet computer on the desktop, which is showing a spreadsheet:

Cost of bank bailout ................................EUR10bn

Budget deficit and debt rollover.....................EUR 7bn

Total...............................................EUR17bn

Maynard opens his legal pad and starts writing. “Nonetheless, bygones are bygones, I suppose. As before, I propose and you dispose. Remember that your first duty is to reach an adequate solution for Surpyc, but you will also be judged on the effect that your actions have on the wider global system. We are the One World Government, after all. As the spreadsheet shows, we need seventeen billion euro, or we’re looking at a disorderly default. First decision to make – when we get up in the morning tomorrow, are we going to negotiate with the Troika, or should we go it alone?

“We negotiate with the Troika”. Go to 10.

“The Troika reliably make things worse. We go it alone”. Go to 28.

2.

Monday morning / afternoon

You and Maynard sit in the office, drinking tea and looking at the telephone.

“Sooner or later, he’s going to crack”, you say.

“Something’s going to give, sooner or later”, Maynard responds.

Time passes.

“Masterly inactivity. Don’t give him anything to push against”, you add. Maynard appears to be doodling.

Maynard looks like he is about to say something, when the phone rings. Both of you are almost too startled to pick it up.

Roll a dice.

If it comes up with a five or six, go to 42

If it comes up any other number, go to 48

3.

Sunday night/ Monday morning

De Grieux acknowledges your call with politeness but nothing more. There is nothing to do but default and let the chips fall where they may. And the chips fall pretty much everywhere.

The markets take Surpyc’s disorderly default very badly. The banking system is in collapse and the ECB has removed support. The island has become the first country to be expelled from the Euro. The immediate consequence of this has been a rapid liquidity crunch across Europe, as it becomes clear that the ECB’s doctrine of “Anything it takes” does not really mean “anything”.

“You did what you could”, Maynard attempts to console you. “Sometimes it just isn’t meant to be. Nobody blames you”. But you have an email from your parents. They have seen you on the news, heading for the airport and they want you to know that your old room is always ready.

YOU HAVE LOST

4.

Sunday morning

Alexi Ivanovich’s office is small and not exactly what you would expect to see from an organization capable of doing billion-euro deals. Maynard takes a look at his business card and his face falls; when you read it you can see why.

He’s a fixer, agent middleman. He has no “organization”. He’s just trying to see if a deal can be talked into happening and to take a commission on it if it does.

“Let’s leave quickly”, Maynard says, and you agree. Your departure is on the very threshold of politeness.

“Where to?” the driver asks.

“Back to the office. We need to make preparations for default” Go to 40.

“To De Grieux’ office. Looks like the troika is the only game in town”. Go to 7

5.

Tuesday morning

“WHAT WERE YOU THINKING!!” Maynard has already packed and left the office. He is shouting at you over the phone, seemingly from an airport taxi.

It is a disaster. Across Europe, lines have formed in front of bank branches. The precedent you have set seems to have spooked every bank depositor into believing that they could be the next ones to be expropriated. Meanwhile, the sudden loss of EUR30bn of offshore deposits has left the banking sector on its knees, requiring another bailout. You have received a curt memorandum informing you that your services will not be required to organize this one.

YOU HAVE LOST

6.

“NOOOOO!” You are somewhat embarrassed at the volume of the howling noise that leaves your body. Maynard turns to pour some tea, rather sheepishly, but he is clearly shocked too.

“Well”, he says. “We’re in the lap of the gods now”.

“Is there time to revise the plan? Can we call the troika back?” you ask, feverishly trying to come up with ideas.

“Out of time, I’m afraid. Can’t keep having bank holidays forever.”

Roll two dice.

If the sum is two or three, go to 11.

If the sum is four or greater, go to 26.

7.

Early Sunday evening

De Grieux is visibly angry that you have kept him waiting so long. “Who have you been talking to?”, he demands. Out of professionalism, and embarrassment, you refuse to tell him.

For the rest of the meeting De Grieux is obstinate. There is no more money forthcoming from the troika, and the ECB is wholly inflexible. As he explains it, the banking system of Surpyc has been living on borrowed time for far too long. You try to make some comment about the willingness of the German government to compromise in the past, but this turns out to be a big mistake.

De Grieux is somewhat intimidating personally as he invades your personal space. “The internal politics of the troika are none of your business. You have a job to do and I suggest you do it. Make your budget, and make sure it passes the parliament. You have already wasted half a day for no obvious reason”.

Maynard smoothes things over, a little bit, and describes the problem. You can set one tax rate on uninsured deposits, and one on uninsured, but the total tax take must be EUR7bn. If you set the rate on insured deposits too high, you are going to create massive popular unrest; on the other hand, the lower the rate on small deposits, the higher the rate on uninsured deposits will have to be. If the rate on the large deposits is too big, you will effectively have closed down the financial services industry, and that too will predictably generate opposition in parliament. De Grieux makes a wholly unpleasant noise as he indicates that he would not be too sorry to see the offshore banks close forever.

Back in your office, Maynard has done some rough figuring on his legal pad. “I think there’s two solutions worth considering”, he says. “Either we levy a charge of 15.7% on the uninsured assets and leave the insured deposits untaxed. Or we keep the tax on uninsured deposits in single digits – say 9% – and tag the small deposits at 6.7%”. What do you think?

“Option 1: only tax the large deposits”. Go to 46

“Option 2: keep the top rate down and make the insured depositors pay at least something”. Go to 18

“There’s always the nuclear option. Let’s take this to the brink of default and see if De Grieux is bluffing”. Go to 2

8.

Tuesday morning

You wake up wearily, with a bad head after staying up too late the previous night, smoking cigarettes and strategizing over brandy with Maynard. The news throughout Monday continued to be bad; global markets took the news from Surpyc badly, with the Dow off as much as 260 points at the lows. Obviously you were blamed, and spent most of the afternoon fending off inquiries from your superiors, all of whom seemed to have been got to be Alexei Ivanovich and his organization.

And it didn’t even work. As soon as the banks opened after the Tuesday holiday, the lines snaked up and down the streets. The Surpyc depositors had no confidence that they would be spared second time round, and with the size of the banking sector deficit growing every day, it was increasingly obvious that there would be a second round. You still have the ticket stub from your journey home. You haven’t flown business class since that date.

YOU HAVE LOST

9.

“We won!” Maynard actually hugs you. “Extraordinary! I’d have thought it impossible!”. Clearly, “fifty fifty” was his attempt to spare your feelings. The television is now switching to the scenes of the demonstrations. They are getting distinctly rowdier, although you wouldn’t call what you see an actual riot at this stage. You stagger back to your hotel room, open the minbar and call room service. Tomorrow will be spent by the swimming pool; there is nothing to do but wait until the banks open.

Roll a dice:

If it comes up even, go to 47

If it comes up odd, go to 5

10.

Sunday morning

Maynard is already at his desk by the time you arrive. He directs you to the tablet once again. “We have offers”, he observes, placidly. “There might be some possibility here after all. But the news is decidedly not all good. The troika are … well, read it for yourself”.

Two documents have arrived on your secure email system. The first is from the troika representative. It is quite clearly bad news.

The IMF and ESM are together prepared to underwrite loans of EUR10bn. If a sustainable program with total funding EUR17bn can be agreed, the ECB is prepared to continue to extend Emergency Liquidity Assistance to your banking system. If the program cannot be so concluded, this lending will also be terminated, in which case you should make arrangements for the closure of your two largest banks.

We strongly recommend that you consider a one-off tax on deposits, to take advantage of the considerable offshore financial services industry. We would like to discuss this at your earliest convenience.

Yours, &c &c

M. De Grieux

Maynard sees the colour rise in your face and raises his eyebrows. “Had the same effect on me. Basically, requirements seventeen billion, resources, ten billion, result misery. I’ve got some provisional figures on the deposit system”. He pushes his legal pad across the desk:

Insured deposits..............EUR45bn

Uninsured deposits............EUR45bn

Total.........................EUR90bn

“Think on that. Write it down, you’ll need it. Meantime …”. He gestures back at your tablet. You start to read the second secure message, which is much shorter.

Mr Astley: Subject to agreement on minerals royalties and other commitments, my organization could be willing to advance EUR7bn on terms to be negotiated. Please contact me, immediately and in strict confidence. Best regards, Alexei Ivanovich

“So, a two way choice”, Maynard indicates. “I can set up one conference call this morning, and perhaps a second this afternoon. Who shall we speak to first?”

“The troika”. Go to 25

“The Russians”. Go to 35

“Actually it’s a three way choice. We don’t have to talk to anyone. We’re going to default. No, I know that means leaving the Euro. My mind’s made up”. Go to 40

11.

Tuesday morning

You wait for the earthquake, but the earthquake never comes. Deposits start to flood out of the country, but the ECB continues to provide the temporary loans to fund their exit. Shortly after the market open, you receive a visit in your office. M De Grieux and Alexei Ivanovich appear to have been communicating with each other independently of you. Between the two of them, they have been able to find the missing EUR7bn. The loan terms are onerous, but the show of commitment is impressive – the markets seem to be impressed that a new spirit is active in Europe, under which it can expect to see problems solved collaboratively and with much larger fiscal transfers.

“Who’d have known it? He was bluffing all along”, you chirp to Maynard, as the two of you wait for the airport taxi.

“I think we dodged a bullet there. Still, a win’s a win”.

YOU HAVE WON

12.

Sunday afternoon

Maynard swiftly and efficiently arranges a round-table meeting between you, Ivanovich and De Grieux. Talks go on for the whole afternoon, with the troika representative repeatedly leaving the room to talk on the telephone. Ivanovich never leaves the room; he clearly has authority to negotiate and sign off. He grows more and more amused as the afternoon wears on.

By seven o’clock, there is an agreement. The troika will contribute EUR11bn, Ivanovich’s company will buy the resources rights for EUR5..5bn, and the ECB will tolerate the slippage in the plan, effectively kicking the can down the road.

“Under the circumstances”, you say to Maynard, “I don’t see much benefit in us hanging around to see the market open”.

“A deal’s a deal”, he agrees. The two of you hail an airport taxi as De Grieux starts his press conference.

YOU HAVE WON

13.

Sunday night

It is hardly an hour before the phone starts ringing in response to your ultimatum. De Grieux greets you with surprising warmth. “Well”, he chuckles, “I suppose we need to open up the supposedly non-existent Plan B, then!”. The two of you work on details through the small hours, ready to draft a statement to be released before the markets open. The missing EUR7bn is back, or at least EUR5bn of it is, released from a variety of emergency budgets and bilateral loans.

Your career has survived another knock. Everyone accepts that Surpyc was an impossible situation. All the officials loudly assert that it doesn’t set a precedent, but the world knows now – when it came to the crunch, Europe blinked.

YOU HAVE WON

14.

Sunday afternoon

“Sensible”, says Maynard. “We keep some kind of concept of moral hazard alive, and we stop ourselves from having to guess the reactions of a crowd. Thump the tax on the lowest elasticity, that’s what I say”. You cannot help thinking he sounds like he’s whistling past a graveyard.

All afternoon, Maynard works with legislators on a bill for an emergency session to be held that evening, while you field increasingly intrusive and angry calls from Alexei Ivanovich. Someone is clearly leaking, and Ivanovich is equally clearly angry that you haven’t responded to his offer of a meeting. As the crucial vote draws near, you begin to worry that you have done the right thing.

Roll two dice.

If the total is nine or greater, go to 27.

If the total is eight or less, go to 32.

15.

Monday night/ Tuesday morning

Ivanovich never gets back to you. But as evening turns into night, De Grieux calls. The two of you work on details through the small hours, ready to draft a statement to be released before the markets open. The missing EUR7bn is back, or at least EUR5bn of it is, released from a variety of emergency budgets and bilateral loans.

Your career has survived another knock. Everyone accepts that Surpyc was an impossible situation. All the officials loudly assert that it doesn’t set a precedent, but the world knows now – when it came to the crunch, Europe blinked.

YOU HAVE WON

16.

Monday morning

Another day, another emergency session of the legislature. You are well rested, but Maynard has been up all night, fielding calls as international leaders step up pressure on the legislators. The failure of the first plan has unnerved markets somewhat, but you only need to win over eight waverers. Your hopes are reasonably high. You turn on the television and wait for the vote to be announced.

Roll two dice.

If the total score is five or greater, go to 29.

If the total score is four or less, go to 6

17.

Monday night/ Tuesday morning

After a brutal late night battle, your package is passed. You ring De Grieux at three in the morning, doing little to improve his temper, but confirming that the troika is prepared to proceed on the basis of EUR7bn raised from a tax on uninsured deposits.

Maynard yawns and heads for the hotel, saying “Well, now we see. The offshore depositors won’t like it, but we’ve got our money and the troika should play fair with us. Nothing to do until tomorrow morning”.

Over breakfast, the two of you rapidly cheer up.

Your Blackberry is still buzzing with angry messages from Alexei Ivanovich, who is calling you every name under the sun. But the financial press generally agrees that the final compromise was the best deal available, albeit after a lot of unnecessary drama. The people of Surpyc were pleasantly surprised to discover that, after all, their deposits were not to be confiscated; public feeling is still not exactly favourable and there are a number of hard cases of ordinary citizens who had the bad luck to have their house sale proceeds sitting in an account over the weekend. But the troika have paid up, and although the end of the tunnel is a long way away, crisis seems to have been averted. The principle that insured deposits are sacrosanct appears to have been strengthened, if anything, by your little adventure.

YOU HAVE WON

18.

Monday morning

Having stayed up all night trying to draft your legislation and build a coalition, you are now in the lap of the gods. Alexei Ivanovich has proved to be surprisingly helpful; all manner of international financiers have called your office expressing support for your “measured” approach, and, somewhat more ominously, asking questions about future tax treaties.

By late afternoon, Maynard is worried. Things have dragged on too late, and there will not be time to revise any plans if this does not pass the legislature first time. “We’re basically hoping that not too many of the coalition are bright enough to realize that this bill is electoral suicide. Let’s hope that they’re … sensitive to the concerns of the offshore lobby”, he informs you.

“Delicately put, Maynard”, you reply.

Roll a dice

If it comes up with a one, go to 21

If it comes up a two or higher, go to 38

19.

Tuesday morning

You and Maynard are sipping glasses of champagne in the airport bar.

“I think our sequencing was just right”, you say as you clink glasses.

“Can’t go at these things like a bull at a gate”, Maynard agrees. “Got to prepare the ground”.

Your Blackberry is rapidly filling up with angry messages from Alexei Ivanovich, who is calling you every name under the sun. But the financial press generally agrees that the final compromise was the best deal available, albeit after a lot of unnecessary drama. The people of Surpyc were pleasantly surprised to discover that, after all, their deposits were not to be confiscated; public feeling is still not exactly favourable and there are a number of hard cases of ordinary citizens who had the bad luck to have their house sale proceeds sitting in an account over the weekend. But the troika have paid up, and although the end of the tunnel is a long way away, crisis seems to have been averted. The principle that insured deposits are sacrosanct appears to have been strengthened, if anything, by your little adventure.

“Cheers”, you say, and drain your glass.

YOU HAVE WON

20.

Monday morning

The markets open but the domestic banks don’t. According to your orders, the bank holiday has been extended to Wednesday, to allow for the printing of a new currency, into which all of the bank deposits and assets are redenominated. All of your external liabilities are in default. The world pauses for breath …

Things go badly. Bank runs take off in Spain, Italy and even France. The ECB holds the line, eventually, but economic recovery has been set back by five years. The lost decade is a reality.

In the context of a recession-bound Europe, Surpyc never stood a chance. The new currency was inflationary, leaving the island plagued by shortages of import commodities, which eventually even undermined the tourist industry. Political instability was rife, with successive short-lived civilian governments alternating with “caretaker” administrations. Under these conditions, the natural resources were never likely to be successfully developed under anything other than kleptocratic terms.

Your career never recovered from the savaging that Maynard gave it in his report. Nobody can understand why you took such a crazy gamble. This was your last assignment.

YOU HAVE LOST

21.

Monday afternoon / Monday night / Tuesday morning

You do your best not to think about the deals that went on, through the afternoon and late into the night. You particularly do your best not to think about what Alexei Ivanovich might have been doing, hanging around the legislature with a mobile phone glued to his ear. But, for better or worse, around three o’clock in the morning, your bill passed. M De Grieux stayed up to watch television at your office, the two of you having come to a grudging accommodation. He was able to confirm the troika passage on the basis of the EUR7bn raised, although the look he gave you as he signed the documents suggested that he did not approve of your methods.

The small depositors of Surpyc were resigned to their fate; it seemed that years of recession and corruption had more or less conditioned them to accept the arbitrary seizure of their property. Importantly, there was no hint of contagion to the rest of Europe. You still worry for the people of Surpyc, but they can make their own destiny now, albeit under circumstances decidedly not of their choosing. Maynard is equally philosophical.

“We didn’t take on the big interests, and we kind of squeezed the little guy. But we had to win this one. I think it was a judgement call; people could criticize us, but we were the ones there. Politics isn’t a game for squeamish people”.

YOU HAVE WON

22.

Sunday night/ Monday morning

De Grieux greets you with surprising warmth. “Well”, he chuckles, “I suppose we need to open up the supposedly non-existent Plan B, then!”. The two of you work on details through the small hours, ready to draft a statement to be released before the markets open. The missing EUR7bn is back, or at least EUR5bn of it is, released from a variety of emergency budgets and bilateral loans.

Your career has survived another knock. Everyone accepts that Surpyc was an impossible situation. All the officials loudly assert that it doesn’t set a precedent, but the world knows now – when it came to the crunch, Europe blinked.

YOU HAVE WON

23.

Sunday afternoon

Maynard puts a call through to De Grieux’s office. It is not good news.

You were prepared for a bit of pushback, but not for the storm of rage occasioned by the suggestion. Bringing outside private companies into the bailout deal is well beyond your remit.

You are quickly left at the airport, with a printout of your e-ticket home, and without your Blackberry. The World Government will continue to handle this crisis, but your role is over.

YOU HAVE LOST

24.

Monday evening / Tuesday morning

The debate winds up early, at around five o’clock and the vote is not even really close. The President’s own party votes for your measure, but none of the opposition do. The evening news presenter is visibly embarrassed at the extent to which the legislature has decided to protect the offshore industry rather than domestic depositors. Maynard is almost physically shrinking away from you as you turn round from the television screen, embarrassed.

You wake up wearily, with a bad head after staying up too late the previous night, smoking cigarettes and strategizing over brandy with Maynard. The morning papers were bad; global markets took the news from Surpyc badly, with the Dow off as much as 260 points at the lows. Obviously you were blamed, and spent most of the afternoon fending off inquiries from your superiors. You protest that “it is hardly my fault that the legislators wouldn’t vote in their people’s interests”, but everyone knows that it was your job to deal with the realities of local politics. And in any case, fault or not, you were the guy at the helm when the ship sailed into the iceberg.

The package was EUR7bn short. This quickly turned into a EUR30bn shortfall, as the banking system collapsed. Contagion was contained, just barely, but Surpyc left the Euro, and the damage done looks like it will take years to repair. You are living in a rented flat, burning through your savings. You are trying to write a screenplay about your experiences but so far nobody wants to look at it.

YOU HAVE LOST

25.

Later, Sunday morning

M. De Grieux is an affable enough European technocrat, but he is unwilling to give an inch. There is no more money forthcoming from the troika, and the ECB is wholly inflexible. As he explains it, the banking system of Surpyc has been living on borrowed time for far too long. His voice trails away half-way through his explanation, however – you shoot a quizzical gaze to Maynard. After the meeting, Maynard explains:

“They’ve left it this long because they wanted to coincide with the bank holiday. They think that the deposit tax is a clever solution. I think they would rather like to use Surpyc as a testing ground; if creditors lose money here and the world doesn’t fall apart, then it sets a precedent which might be rather useful elsewhere.”

It is hard not to take a little bit of offense at being manipulated so much, so you resolve to confront De Grieux over lunch. This proves to be something of a mistake, as it costs you a shirt front covered in crumbs and spittle.

De Grieux is somewhat intimidating personally as he invades your personal space. “The internal politics of the troika are none of your business. You have a job to do and I suggest you do it. Make your budget, and make sure it passes the parliament”.

Maynard smoothes things over, a little bit, and describes the problem. You can set one tax rate on uninsured deposits, and one on uninsured, but the total tax take must be EUR7bn. If you set the rate on insured deposits too high, you are going to create massive popular unrest; on the other hand, the lower the rate on small deposits, the higher the rate on uninsured deposits will have to be. If the rate on the large deposits is too big, you will effectively have closed down the financial services industry, and that too will predictably generate opposition in parliament. De Grieux makes a wholly unpleasant noise as he indicates that he would not be too sorry to see the offshore banks close forever.

Back in your office, Maynard has done some rough figuring on his legal pad. “I think there’s two solutions worth considering”, he says. “Either we levy a charge of 15.7% on the uninsured assets and leave the insured deposits untaxed. Or we keep the tax on uninsured deposits in single digits – say 9% – and tag the small deposits at 6.7%”. What do you think?

“Option 1: only tax the large deposits”. Go to 14

“Option 2: keep the top rate down and make everyone pay at least something”. Go to 37

“There’s always the nuclear option. Let’s take this to the brink of default and see if De Grieux is bluffing”. Go to 43

26.

Tuesday morning

It is not good. The markets have taken Surpyc’s disorderly default very badly. The banking system is in collapse and the ECB has removed support. The island has become the first country to be expelled from the Euro. The immediate consequence of this has been a rapid liquidity crunch across Europe, as it becomes clear that the ECB’s doctrine of “Anything it takes” does not really mean “anything”.

“Pretty obvious who’s going to get the blame for this” Maynard mutters. “We are. He is trying to spare your feelings. He was just the advisor; you were taking the decisions. The failure to get a budget passed is going to end up at your door. You sigh, and dial for an airport taxi. You wonder about going back home and opening a restaurant serving deluxe hamburgers.

YOU HAVE LOST

27.

Sunday evening

The news begins to leak on Twitter about the whip-counts before the debate has even ended. Your measure is going nowhere. Somehow, all the populist legislators are melting away and the news bulletins are full of speeches about the future of the island’s financial services industry.

Alexei Ivanovich calls you up to gloat. “You made a very bad mistake, not talking to me”, he says in clipped tones. “You have no understanding of this island. You don’t just show up here and order people around. There are businesses here, relationships …”

You hang up on him. At this point, you don’t really care about being called unprofessional any more. There’s only one last chance. You signal to Maynard to get M De Grieux’s office on the line.

Roll a dice.

If it comes up six, go to 22

If it comes up any other number, go to 3

28.

“Unbelievable”. Maynard mutters. “Hasn’t learned a thing. OK, disorderly default it is then”.

Roll two dice

If it they up a double one or double six, go to 31

If they come up with any other numbers, go to 20

29.

“YES!” You and Maynard jump up and down like sports fans.

“Well, now we see. The offshore depositors won’t like it, but we’ve got our money and the troika should play fair with us. Nothing to do until tomorrow morning”.

You suggest a celebratory dinner, but Maynard excuses himself, as he is tired.

Roll a dice

If it is a one or two, go to 34

If it is a three or higher, go to 19

30.

Your message has been taken. You are assured that Secretary Lew is taking a direct and personal interest.

Go to 41

31. Monday morning

The markets open but the domestic banks don’t. According to your orders, the bank holiday has been extended to Wednesday, to allow for the printing of a new currency, into which all of the bank deposits and assets are redenominated. All of your external liabilities are in default. The world pauses for breath …

Europe survives. The ECB floods the market with liquidity and the banking system holds together. A quick sequence of new policies are agreed, putting together a true fiscal union, faster than anyone had previously believed possible.

Surpyc itself responds well. The capital controls you have instituted hold, and the very rapid currency devaluation quickly attracts investment into the tourism industry, and to develop your natural resources. There are shortages and imports need to be rationed, but the people pull together and a new spirit of trust and democracy animates public life.

The last time you see Maynard, he is shaking his head in disbelief. Nobody pays too much attention to the negative report he wrote about you. His career is still mired in crumpled-collar oblivion, but your star is ascendant. Nothing succeeds like success.

YOU HAVE WON.

32.

Sunday evening

The news begins to leak on Twitter about the whip-counts before the debate has even ended. Your measure has passed. You can see a dozen missed calls from Alexei Ivanovich, but these have long since gone past the point of being productive. He has already accused you directly of unprofessionalism and promised to personally wreck your career. All that you can do now is relax and see what the markets bring.

Roll a dice.

If it comes up one or two, go to 8

If it comes up three or higher, go to 36.

33.

The vote is not even really close. The President’s own party votes for your measure, but none of the opposition do. Maynard is almost physically shrinking away from you as you turn round, embarrassed.

“Always seemed too aggressive to me”, he mutters, hypocritically. “But … we’ve got time for another vote. We can try the other option now, and leave the insured deposits untouched”.

“Plan B it is, then”. Go to 16

“I think we’ve had our shot. Get the plans ready for a default”. Go to 44

34.

Tuesday morning

“Just sheer bad luck”, you mutter, as you and Maynard sip beer at the airport.

“We should have insisted on the troika rethinking”, Maynard replies. “You can’t just go around confiscating deposits like that. We thought we were being clever, just clipping the offshore depositors.”

All around the departure lounge, screens are tuned to financial channels showing the carnage in world markets. The deposit tax in Surpyc fell on nervous markets and has sent European debt spreads out past their highs. Emergency talks are taking place in Frankfurt but at present it looks unlikely that the Euro can be saved. Both Alexei Ivanovich and M De Grieux have sent messages to say that they hold you personally responsible.

“Them’s the breaks”, you mutter to yourself, draining your glass. You wonder about going back to law school.

YOU HAVE LOST

35.

Alexei Ivanovitch makes the appointment quickly and with a minimum of ceremony. He insists, however, that he is not willing to send details by electronic means, or to discuss anything beyond the broadest generalities over a telephone line. As you talk, you can see Maynard’s face screwing up in distaste.

When you get off the line, he explains himself. “I’ve tended to find that situations like this attract an awful lot of chancers and Walter Mitty types. I’d say there’s no better than a one in ten chance this guy is any use at all.”

“I must admit”, you add, glumly, “it’s not very encouraging that he won’t tell us who he’s meant to be representing”.

Roll two dice.

If the sum is eleven or twelve, go to 49

If the sum is ten or less, go to 4

36.

Monday morning

A beautiful cloudless sky greets you, along with the news that Asian markets are up by as much as 3%. The rest of the morning is just as welcome, as you accept the congratulations of Maynard and M De Grieux; the Surpyc affair is generally judged to have been handled as well as it could been. The longer term economic picture is still bleak, but contagion to the rest of Europe has been handled, and the debt path now looks manageable. You head for the airport in triumph, a bottle of local brandy in one fist. Somehow, however, you know that you’ll never shake a slight concern over the rage in Alexei Ivanovich’s voice. Maybe it would be better to get out of this game, look for something in an NGO perhaps.

YOU HAVE WON.

37.

Sunday afternoon

Your bill has been drafted and sent to an emergency session of the legislature.

“Do you think we’re going to get it through?”, you ask Maynard.

“Weeeellll”. He is affecting that languid public school drawl, but you can tell he is as excited as you are. And the furrow between his eyebrows suggests he is not totally approving. “Frankly, I think it’s no better than fifty fifty and potentially a bit worse. It is as controversial as hell to be taking so much from the uninsured depositors. I worry that the financial industry interest groups are not going to be strong enough to protect this legislation from some pretty heavy popular outrage.”

The television screen confirms that this is not going to be an easy ride. Protestors surround both the presidential palace and the legislature. So far, nothing has turned violent though. Maynard turns the sound up, as the television channel switches to the announcement of the vote …

Roll a dice.

If it is a one or two, go to 9

If it is a three or higher, go to 33

38.

Monday afternoon / Monday evening / Tuesday morning

The debate stretches on endlessly, as crowds of demonstrators form outside the legislative building waving placards and accusing the troika of stealing their savings. You, De Grieux and Maynard are beginning to lose patience with each other. It’s clear that the other two men regard your decision to hit small depositors as a clear error of judgement.

Close to midnight, the motion fails. “What were you thinking?”, asks Maynard, plaintively. De Grieux echoes his question, having long since made it clear that the troika package cannot be signed on this basis. You are too tired and ashamed to stay around. Drafting a resignation letter and slipping it under Maynard’s door, you hail a local bus and head for the wilder beaches at the east of the island. Now that the currency is in free-fall, your hard currency savings will last a while, long enough for you to decide what you really want to do with your life.

YOU HAVE LOST.

39.

Tuesday morning

It is not good. Nobody returned your calls The markets have taken Surpyc’s disorderly default very badly. The banking system is in collapse and the ECB has removed support. The island has become the first country to be expelled from the Euro. The immediate consequence of this has been a rapid liquidity crunch across Europe, as it becomes clear that the ECB’s doctrine of “Anything it takes” does not really mean “anything”.

“Pretty obvious who’s going to get the blame for this” Maynard mutters. “We are. He is trying to spare your feelings. He was just the advisor; you were taking the decisions. Nobody understands why you gave up so early, when there was plenty of time for another try at legislation. You sigh, and dial for an airport taxi. You consider starting a blog.

YOU HAVE LOST

40.

Sunday afternoon

“Reckless, in my opinion. You didn’t even try to negotiate. I very much doubt that the depositors will thank you for saving them a ten percent tax by giving them a bankrupt bank and a soft currency asset. I suppose that we can now meet the deposit guarantee fund claims by printing pound notes, but it’s hardly a great start to our new economy. Let’s see how it turns out”. Maynard is scribbling rather agitatedly at something which looks ominously like your assessment form.

Roll two dice.

If you get a double four, double five or double six, go to 31

Otherwise, go to 20

41.

Your call is taken. You are reassured that President Bernanke is taking a direct and personal interest in this case.

Go to 30

42.

The fear is palpable in De Grieux’s voice.

“My god, you are a cold fish”, he says. You smile, and flip him onto speakerphone. “I don’t understand how anyone can behave like that. Do you realize that there is an existential crisis for the Euro here?”

You decide to continue to play it cool. “Don’t bring me problems”, you tell him. “Bring me a solution”. You can see that Maynard is gaining respect for you.

Two hours later, De Grieux has revealed his “plan B”, and the two of you are drafting a press release. With a mixture of further lending, bilateral contributions and a small amount of presumption on the good nature of the ECB, the crisis is postponed, if not averted, and the banks can open on Tuesday.

You head for the airport and the next plane home. You may have made a lifelong enemy or two, but you’ve done your reputation nothing but good. Anyone can bully a little island – it takes a real operator to bully a continent.

YOU HAVE WON

43.

Sunday afternoon

“I am not a fan of madman strategies”, Maynard remonstrates.

“I am”, you reply, feet up on the desk. You can sense that you are driving Maynard crazy and rather enjoy it.

“At least, I am not in favour of madman strategies when applied to our own side”, he pleads.

“Who said De Grieux is on our side? Our side is for a sensible outcome to the crisis and as little contagion to global markets as possible”, you reply. “De Grieux represents the troika. As far as I’m concerned, he’s the enemy. Do it. Let’s play poker”.

Roll two dice:

If the sum is ten, eleven or twelve, go to 13.

If the sum is nine or less, go to 45

44.

Monday morning and afternoon

“You might be right”, Maynard sighs. Suddenly, he is looking very old. “This legislature is not going to agree that the situation is serious. Let’s put in a call to the guys with the money, and tell them that this chance is done. At least we’ve left them time to call their principals”.

You send him home to rest. Then you call the offices of M. De Grieux and Alexei Ivanovich, and have a long conversation with each. Then you wait.

Roll a dice

If it lands on a one or two, go to 15

If it lands on a three or higher, go to 39

45.

Sunday night/ Monday morning

It is less than an hour before the phone starts ringing in response to your ultimatum. De Grieux is incensed and wastes few words in telling you that you have made a bad mistake. He instructs you not to waste time contacting the troika office any more. There is nothing to do but default and let the chips fall where they may. And the chips fall pretty much everywhere.

The markets take Surpyc’s disorderly default very badly. The banking system is in collapse and the ECB has removed support. The island has become the first country to be expelled from the Euro. The immediate consequence of this has been a rapid liquidity crunch across Europe, as it becomes clear that the ECB’s doctrine of “Anything it takes” does not really mean “anything”.

“Everybody blames you”, Maynard says, as the two of you drive to the airport. “Nobody can understand why you went out of your way to annoy the only people who could help you”. The two of you stand at the departures terminal together, before what you know will be your last handshake. Maynard has some parting words.

“I’m going to need you to give me that Blackberry back”

YOU HAVE LOST

46.

Monday morning / afternoon

Having stayed up all night trying to draft your legislation and build a coalition, you are now in the lap of the gods. Alexei Ivanovich has proved to be more of an irritation than you had believed possible, not only bombarding you with calls himself, but bringing down a horde of Russians who want to lobby you against the decision to hit large offshore depositors. Before long, your official Blackberry is practically useless as a communication device.

By late afternoon, Maynard is worried. Things have dragged on too late, and there will not be time to revise any plans if this does not pass the legislature first time. “We’re basically hoping that not too many of the coalition are … sensitive to the interests of the offshore lobby”, he informs you.

“Delicately put, Maynard”, you reply.

Roll a dice

If it comes up with a one or two, go to 17

If it comes up a three or higher, go to 24

47.

Tuesday morning

The demonstrations continued through most of Monday and you felt it prudent not to leave your hotel, but Tuesday morning came and went with something of a whimper. The banks were packed with angry customers, and the wire transfers sent something like EUR5bn of deposits offshore at the open of business, but the ECB was as good as its word and the majority of offshore deposits stayed put. Alexei Ivanovich sent you an email congratulating you on your handling and asking you to stay in touch.

The small depositors of Surpyc were resigned to their fate; it seemed that years of recession and corruption had more or less conditioned them to accept the arbitrary seizure of their property. Importantly, there was no hint of contagion to the rest of Europe. You still worry for the people of Surpyc, but they can make their own destiny now, albeit under circumstances decidedly not of their choosing. Maynard is equally philosophical.

“You can’t solve every problem all in one go”, he muses. “I think we took a lousy hand and played it pretty well, all considered. With a little bit of luck”.

You share a taxi to the airport. You’re beginning to like each other.

YOU HAVE WON

48.

It is De Grieux.

“I am flabbergasted.”, he says. “You have done nothing. You have wasted all the time that you had here. I was waiting to hear your proposal, and you have done nothing. You have not even advanced a proposal to the legislature. There is nothing I can do now. This is all your fault. I hope you’re proud of yourself.” He hangs up.

“I don’t think I can add much to that”, says Maynard. He starts packing up the office. When you wake up in the morning, you are alone in the hotel, and the ATM in the lobby is showing an out of order message. The riot gas has already started to blow around the streets.

YOU HAVE LOST.

49.

Sunday morning

Alexei Ivanovich’s office is well-appointed and clearly long established in the central business district. The mystery of his “organization” is solved as soon as he hands over a business card; he represents one of the world’s largest natural resources companies, with a long standing interest in Surpyc and with, unquestionably, the financial resources to finance the transaction he is proposing. But there are problems with price. Moscow are only willing to come up with EUR5bn, and their deal has some conditionality too, which he would be overjoyed to discuss. Maynard draws you to one side.

“We’re taking a gamble here. This is a quid pro quo. If we take this guy’s money, we’re not going to be able to do a deposit tax of any kind. So we’ll have a package totaling EUR15bn, instead of EUR10bn. Do we think we can finesse that with the troika?”

If you answer “No”, then politely break off negotiations and go to 25

If you answer “Let’s give it a try”, then roll a dice.

If it comes up even, go to 12

If it comes up odd, go to 23