Note kindly translated by Anne-Marie de Grazia

Syrisa triumphed in the Greek elections on January 25th. Little time has passed, and yet we can already take a step back and evaluate the event. After a week of astonishment at watching a government actually applying its program (and holding its promises, for a change…), after having duly taken note of the first political actions of Alexis Tsipras’ team (and of his new minister of finances), after having seen the “Troïka,” that is, the alliance of the IMF, the European Central Bank and the European Commission, being remaindered to the storage room of out dated accessories [1], the time has come to examine the strategy of Syriza.

Syriza’s strategy

The latter holds in a single point. Tsipras wants to find back to budgetary room for manoeuver. For this, he needs to « recuperate » between 6 and 8 billion euros, which are at present dedicated to the payment of the interests on the Greek debt. He needs this money in order to implement the measures, which will keep the Greek people from biting the dust. This is a tragic reality, and yet it is absolutely evident. This diminution of the load of interests is necessary and will allow the government to implement a program of exit from austerity. Which is why Syriza has made of the partial annulation of the debt, or at the very least of a moratorium of twenty to thirty years one of its priorities. We know that, on this point, Syriza has the support of economists – and not the least of them – as well as of the American government. We also know that the reserves of Greece are insufficient for it to be able to make the payment coming up at the beginning of July. In all, it’s 23 billion euros, which Greece would have to shell out. Given that Tsipras has rejected the last slice of the help plan foreseen by the “troïka,” this means that an agreement must imperatively be reached before next summer.

But he is going to hit against a very hard front of countries, led by Germany. We know that the latter, through the voice of Chancellor Angela Merkel, has firmly opposed any annulation of debts. This still leaves open the solution of a moratorium. But it is clear that in this case, discussions will focus on its nature and its duration. As a matter of fact, Alexis Tsipras would like to link his country to a general revision of austerity policies. In so doing, he is striking with full force at the German policy, which maintains that, outside austerity, there can be no salvation. Which means that the confrontation with Germany and its allies is going to be inevitable. Whatever the language tricks, it is clear that in this struggle, there is going to be a winner and a loser. The stakes are high for Alexis Tsipras, but also for Angela Merkel. Should she meet defeat, bend to the will of other countries, it is not only her own political position which would be weakened in Germany, but the credibility of her position would find itself considerably affected. Having given in on this capital point, what arguments could Germany bring up in order to avoid the Eurozone turning by and by into a transfer union? But were Alexis Tsipras to surrender decisively, he would torpedo his own political future and the one of Syriza; and would leave the field open to the most extreme political right.

The process of negotiation and game theory.

We are presently watching a game of bluff and counter-bluff. The Tsipras-Varoufakis (the Minister of Finances) duet is playing the part of « good cop / bad cop » to perfection. In the same way, Mrs Angela Merkel is playing masterfully the card of grumpy rigidity. There is clearly a lot of showmanship in all of this. And one must know that Game Theory is precisely one of the strong points of the minister of Finances [2]. Yanis Varoufakis thinks that the ongoing negotiation can be brought down to a version of the « prisoner’s dilemma. » But this game can easily degenerate into a form that is well known in Game Theory, called « chicken »[3]. This form theorises a sequence well-known to movie buffs (Rebel Without A Cause): two car drivers compete by driving toward a cliff. The first who “chickens out” before the collision and deviates from his trajectory loses. He becomes the “chicken.” If neither gives way, the two cars plunge to destruction and there are two dead… This game, if it is not rehearsed (and if there is no learning process) and if an unforeseen event doesn’t come in-between, allows only for a total victory of the one over the other. To this extent, it is far different from the “prisoner’s dilemma,” which demonstrates the interest existing in implicit cooperation [4].

One can well see how, given the risks at stake in case of « weakening » in such a confrontation, Tsipras as much as Merkel could get on a collision course and go to the end. The risk is very high therefore that negotiations will not succeed in a search for compromise but in the contrary, will reinforce each in her/his will not to give in.

What would a frontal collision signify in the case of Greece? If we are dealing with a refusal of Germany to admit that austerity doesn’t work, a refusal motivated as much by ideological representations as by a certain vision of Germany’s interests, combined with a refusal to give in to Greece because it is Greece (we are reminded of the wounding words about the “olive-pickers”), and if on Athens’ side they refuse to give in because they know that this will be the end of the Syriza experience, the idea of the frontal collision takes its full meaning. In this case, no solution will be found between now and July, and Greece must default on its debt. The ECB’s reaction will be to cut off the financing of Greek banks, which will entail the decision by the Greek government to mobilize the Greek Central Bank in order for banks not to be deprived of credit and, with one thing leading to another, Greece will leave the Euro.

Discredit or rupture

In this strategic game, it is clear that Greece has deliberately chosen the strategy qualified by Thomas Schelling, one of the founders of game theory, but also of nuclear dissuasion, as « coercive deficiency »[5]. In fact, this term of « coercive deficiency » was imagined by L. Wilmerding in 1943 in order to describe a situation where agencies enter into expenses without prior financing, knowing that morally the government will not be able to refuse funding them [6]. Schelling’s contribution consists in showing that this situation can be generalized and that a situation of weakness can reveal itself to be an instrument of coercion upon others. He also showed how it can be rational for an actor knowing himself to be in a position of weakness from the start, to increase his weakness in order to use it in negotiation. Reversing Jack London, one can speak in this instance of a “strength of the weak.” [7]. It is in this context that we must understand the renunciation by the Greek government of the last slice of aid promised by the so-called « Troïka, » amounting to 7 billion euros. Of course, having rejected the legitimacy of said “Troïka, » it could not logically accept to take advantage of it. But, in a more subtle way, this gesture is putting Greece voluntarily at the edge of the abyss and demonstrates all at once its resolve to go the bitter end (like Cortez burning his ships before moving up to Mexico) and to increase the pressure on Germany. We are here in a full blown exercise of « coercive deficiency ».

The United States have sized it all up. We know that Barack Obama has summoned Angela Merkel to Washington on January 9th[8]. On the agenda of this meeting the Greek problem will figure as a matter of course. We note in passing that this shows the constant involvement of the United States in European affairs. All those who crow that the Euro would give us independence in regard to the Dollar, would do well to meditate on the meaning of this encounter. “European” policies are largely decided in Washington. This is moreover quite logical, the Euro being the last line of defence of the Dollar. If it disappears, the Dollar will be exposed stark naked to international monetary speculation.

It is possible therefore that Angela Merkel will be compelled to give in. But if she does, she will be engaging in a process in which she will lose all mastery of the situation, in Europe as well as in Germany. Within Europe, giving in to Greece will immediately arouse new demands. The credibility of the German position will be destroyed, and Germany cornered into making new concessions, which will inevitably make the cost of its contribution to Europe rise. It will signal the entrance into the notorious “transfer union,” which is the nightmare of a large sector of German leaders. But, in Germany itself, Angela Merkel will lose the benefit of her “hard” position and will have to submit to multiple pressures from her electorate as well as from her political allies, without even counting the anti-Euro AfD party waiting in the wings. She has no other choice therefore than between being discredited internally and externally, and a break-up.

The beginning of the end?

This context is, of course, followed with attention in other countries. French authorities are dreaming of being the great mediators in the announced conflict. But this is not a congress of the Socialist Party. There can be no “synthesis” between interests so clearly opposed. The position of France itself is hostage to the religious creed in the Euro, which unites part of our political elite. It is clear that in his desperate attempt to find a “synthesis,” François Hollande will end up discredited for good. It is symbolic, moreover, that it is with Germany that the United-States are discussing, not with France. The latter is no longer a factor nor a player in the game. And this too is one of the lessons of the crisis and of the arrival of Syriza to power in Athens. By demonstrating the possibility of other politics, its arrival is destroying what was left of the Socialist Party’s discourse.

We have probably reached the beginning of the end, in Europe as well as in France. And this perspective is terrifying as well as fascinating for the actors in this political game.

[1] http://www.rtbf.be/info/monde/detail_le-president-de-la-commission-europeenne-veut-supprimer-la-troika?id=8892950

[2] One may read Varoufakis Y., Rational Conflict. Oxford, Blackwell, 1991 or, by the same author, (avec Hargreaves-Heap S.) Game Theory: A critical text. London and New York, Routledge, 2004

[3] Sugden, R. The Economics of Rights, Cooperation and Welfare, 2nd edition, Palgrave Macmillan, Londres-New York, 2005

[4] Skyrms, B., Evolution of the Social Contract. New York, Cambridge University Press, 1996.

[5] Schelling T., The Stategy of conflict, Harvard University Press, Cambridge (Mass.), 1960.

[6] Kiewiet, D., Roderick McCubbins et Mathew D. The logic of delegation: congressional parties and the appropriations process, Chicago (Ill.), University of Chicago Press. 1991, pp. 213–249.

[7] Schelling T., The Stategy of conflict, op.cit. p. 37.

[8] http://www.lesechos.fr/monde/europe/0204126541149-le-buzz-des-etats-unis-barack-obama-va-recevoir-angela-merkel-a-la-maison-blanche-1089589.php