Greece — and now CONFESS!

Greece, you have any right for a referendum
And here’s why.
Let’s consult game theory – the playground of Mr Varoufakis – to find some answers.

Let’s be clear: neither Greece nor the European Union is interested in Greece’s disintegration.
Greece’s referendum is NOT about Greeks membership in the European Union!
The general question of a Grexit is a prisoner’s dilemma in the eyes of a game theorist.
It is clear that Greece’s membership as well as its disintegration will cost the EU tax payer anyhow.
The costs of a dissolution are assumed to be higher than the cost of integration.
Greece and the EU are thus better off within the European framework, so both they more or less openly confessed to stay together.

Within that prisoner’s dilemma, Greece and the European Union argue about the cost and shape of an economic solution for Greece.
The European Union wants Greece to adopt its international economic recipes in exchange for EU taxpayer’s money.  As those recipes brought despair over Greece and other European countries, Greece however wants EU taxpayer’s money only for its home-grown economic solutions.

The conflict runs along the line of national souvereignity and foreign-controlled policy-making. It cannot be said often enough that Greece demands exactly those rights which any other EU member state demands for itself.

Just think of the UK demanding 100% reimbursement on its EU contributions or Luxemburg, Ireland, or The Netherlands demanding sovereignity over its economic policy as a tax haven at the cost of other EU members like Greece.

Europe seems to mean: “You pay to avoid our national suffering.” There could be no other explanation for the communist mood that broke out in some European countries when the balance sheets of their national banks were under water.

So, why should Greece exempt itself from this feast?

Game theory provides the solution

The inner question on costs and measures for a solution of the Greek debt crisis can be expressed as a payoff matrix.

gr_eu_payoff

The payoff matrix is neither representative nor complete. First, it illustrates that Greece can only win by complying to the demands of the EU. Second, it shows that the EU itself can only avoid a financial loss when Greece leaves the EU.

If for example Greece and the EU adopt a multinational solution, Greece will get subsidies, loans, and perhaps debt relief at the cost of an asset loss (privatization) and maybe a further decrease of national income due to economic reconstruction.
The EU’s demand for a tax reform in Greece is not considered because an expanded tax base may be offset by a decreased national income. But it can be assumed that any decrease of Greek national income will be compensated by EU subsidies.
The EU will bear the cost of that solution for the sake of a Greek EU membership.

This conflict has arrived at a deadlock after 6 months of negotiations without any results.
Nobody moves, nobody wants to give in, nobody wants to step out of that vicious cycle.
A game theorist would propose to clarify the inner question first and the general question later.
That means to convert a one-time game into a game with at least two rounds.
That also means that one party can select its strategic course first, followed by the decision of the other partner.

But who should move first?

It should be Greece!
Why?

Let’s assume the EU officials would always advocate for a multinational economic solution and thus stay in the left column of the payoff matrix.

If the EU is the first voter, then it would always select the multinational solution in the first column of the payoff matrix. The Greek government would then select the national solution.

If the Greek were the first voter, the result would stay the same because the EU would vote again for a multinational solution. The solution would always arrive at a transfer union, rendered by the blue coloured cells of the matrix.
Greece would receive subsidies and loans to offset the loss of national income from the EU without any commitments whereas the EU itself loses its political influence in Greece. That would be the corner stone for a European disintegration.

Hence, the solution can only be a different vote by the Greek public.

If the Greek public selects the multinational solution in the first row of the payoff matrix as well as the EU then both parties are better off. The solution to both voting rounds can then be found in the gray coloured cells of the matrix.

That’s why Greece has to vote FIRST for its future economic solution!

Greece, please make your vote and accept the result!
Thank you again, Mr Varoufakis and Mr Tsipras, for bringing back democracy to Europe.
Game theory justifies your move although both of you sacrifice your political destiny.

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