Greece and the Troika's 'Grexit' Game Theory

JUN 4, 2015

Forbes

Jon Hartley

CONTRIBUTOR

Following the recent tragic death of the famous mathematician John F. Nash Jr., known for his 2001 biopic, “A Beautiful Mind”, it’s incredibly interesting how much his game theory concepts can describe and make predictions about Greece’s decision to reach a new agreement on bailout terms by Friday’s deadline and whether the rest of Europe would eject Greece from their currency union.

The Nash equilibrium, named after Nash who proved its ubiquitous existence in his 28-page Nobel-prize winning 1951 Ph.D. thesis, was a revolutionary concept that essentially a way to predict the outcome of events in matters of conflict and non-cooperation much like between Greece and Europe in their present stand-off.

Greece and Its Creditors Agree on Some Measures in Bailout Talks

‘Combative’ negotiations resume after ‘some aspects of a financing deal’ agreed overnight

The Wall Street Journal

By GABRIELE STEINHAUSER in Brussels and  NEKTARIA STAMOULI in Athens

Updated June 4, 2015 6:51 a.m. ET

3 COMMENTS

BRUSSELS—Greek Prime Minister Alexis Tsipras and his country’s international creditors were able to agree on some aspects of a financing deal at a meeting Wednesday night, but differences remain on some key issues, European officials said Thursday.

Greece and Eurozone Send Positive Debt-Deal Signals

By LIZ ALDERMAN and JACK EWINGJUNE 3, 2015

The New York Times

ATHENS — As Prime Minister Alexis Tsipras of Greece visited Brussels on Wednesday to discuss a bailout deal, signs emerged that the two sides might be edging closer to a compromise.

Greece and its creditors understand the need for a quick solution to provide relief to the debt-burdened country and have agreed, at least in principle, to move toward a deal. The creditors even appeared ready to make a significant concession that would free up more money to flow to the Greek economy.

Time to talk about capital controls in Greece

Dhara Ranasinghe      

CNBC

Greece's economy and its banking sector are feeling the strain of the reforms-for-rescue deadlock between Athens and its international creditors – and fears are rising that ordinary people's bank accounts could be next to feel the squeeze.

Greek banks are increasingly reliant on emergency funding from the European Central Bank (ECB) to get by and analysts say that if the central bank curbs this lending, Greece may have no option but to impose capital controls.

Europe and Greece: The Damage Is Done

6 JUN 3, 2015 12:01 AM EDT

By Clive Crook

Bloomberg view

First, Greece's economic situation, which was bad to begin with, has deteriorated further.

Second, as a result, the country's bad fiscal situation is now worse.

Third, the world has learned that exit from the euro system is not just thinkable but has actually been advocated,…

ECB to press case for steady QE, may urge Greece to accept deal

Wed Jun 3, 2015 2:35am EDT Related: GREECE

FRANKFURT | BY BALAZS KORANYI AND JOHN O'DONNELL

Reuters

The European Central Bank is set to raise its inflation forecast on Wednesday, saying that its trillion-euro-plus asset buying program is already paying off, and may urge Greece to accept a new deal from its creditors to access fresh aid.

In what could be the bank's least eventful meeting in months, the ECB is set to keep rates on hold, confirm its growth forecasts, make the case for a steady pace in quantitative easing and discuss Greece only briefly, leaving most of the talking to Brussels.

Does Greece Have a Diabolical Plan B?

JUN 2, 2015 9:29 AM EDT

By Leonid Bershidsky

Bloomberg

Perhaps the most baffling thing about the current Greek crisis is the sheer stubbornness of the country's leaders: Don't they understand they are committing economic suicide by refusing to make more concessions to the country's creditors? What are they playing at?

Greece Challenges Creditors With New Proposal to Break Debt Impasse

By LIZ ALDERMANJUNE 2, 2015

The New York Times

ATHENS — Greece elevated the game of brinkmanship with its international lenders on Tuesday, as Prime Minister Alexis Tsipras announced that his government had sent creditors a new proposal, on Greece’s own terms, to unlock financial aid that the struggling nation desperately needs.

But the creditors — the European Commission, the International Monetary Fund and the European Central Bank — were moving on Tuesday toward completing their own proposal to break the monthslong impasse with Athens. That move came after European leaders, including Chancellor Angela Merkel of Germany, held an emergency session in Berlin on Monday night to come up with a blueprint.

Greece’s Creditors Draft Final Offer for Bailout Aid in Bid to Break Stalemate

European officials say plan amounts to a take-it-or-leave-it offer to unlock much-needed aid for Athens

The Wall Street Journal

By MARCUS WALKER

Updated June 2, 2015 4:39 p.m. ET

ATHENS—Greece’s international creditors are poised to present the country with the outlines of a bailout deal that amounts to a take-it-or-leave-it offer, a move aimed at breaking a monthslong stalemate but which risks a political backlash and even a government collapse in Athens.

Merkel, Hollande and Juncker to Meet in Berlin in Attempt to Save Greece

Bloomberg 

by Nikos Chrysoloras

Alessandro Speciale

Rebecca Christie

8:51 PM EEST

June 1, 2015

European leaders and the head of the International Monetary Fund gathered in Berlin to discuss plans to present Greece with what’s likely to be its only realistic chance of avoiding default and staying in the euro.

Greek Talks With Creditors Deepen as Payment Clock Ticks

Bloomberg

by Nikos Chrysoloras

4:58 PM EEST

May 30, 2015

Greek officials and creditor institutions are locked in talks for another weekend as both sides work against a payment deadline to avert default and a euro-region exit.

“The key issue is to resolve the situation so that Greece can remain a member of the euro area,” the European Commission’s vice president, Jyrki Katainen, told Finland’s YLE TV1. “Unfortunately over the past six months things have turned for the worse in Greece, purely for political reasons.”

The standoff between Greece’s anti-austerity coalition and creditors over the terms attached to the country’s emergency loans has triggered a liquidity squeeze, tipping the economy into a double-dip recession.

John Nash's Game Theory and Greece

MAY 29, 2015 2:00 AM EDT

By Mohamed A. El-Erian

Bloomberg

Economics and finance suffered two tragedies in the past week: the death of the Nobel laureate John Nash and his wife in a horrible car accident, and more delays from Greece and its creditors in reaching an agreement on a path out of the costly and protracted crisis.

Jacob Lew Warns Time Is Running Out to Reach Greek Debt Deal

By JACK EWINGMAY 29, 2015

The New York Times

DRESDEN, Germany — The United States Treasury secretary on Friday once again warned eurozone countries that they should not delay reaching a deal on further aid for Greece, highlighting a growing sense that negotiations are moving too slowly to avoid the country’s disorderly exit from the eurozone, with repercussions for the global economy.

Jacob J. Lew, the Treasury secretary, has used meetings of Group of 7 finance officials and central bankers here this week to push for faster action for Greece. He repeated that message on Friday as the meetings concluded, warning of the risks if Greece and its eurozone partners do not reach an agreement soon.

Greece open to compromise to seal deal this week: interior minister

 May 30, 2015 7:47am EDT Related: WORLD, GREECE

ATHENS

Reuters

Greece's government is confident of reaching a deal with its creditors this week and is open to pushing back parts of its anti-austerity program to make that happen, the country's interior minister said Saturday.

Greece and its EU/IMF creditors have been locked in talks for months on a cash-for-reforms deal and pressure is growing for a deal, since Athens risks default without aid from a bailout program that expires on June 30.

Greece's Cuban Path to a Parallel Currency

8 MAY 28, 2015 7:24 AM EDT

By Leonid Bershidsky

The idea of a parallel currency for Greece is worthy of consideration, with even German Finance Minister Wolfgang Schaeuble broaching the possibility as Greece fails to reach an agreement with its creditors. It could work -- albeit not in the way suggested by the pretty models circulated by economists in recent months.

Only Greece Can End Its 'Groundhog Day' Misery

10 MAY 29, 2015 2:00 AM EDT

By Mark Gilbert

In the film "Groundhog Day," Bill Murray is condemned to relive the same 24 hours on an endless loop. The happy ending (he gets the girl) only comes when he changes his destiny by becoming a nicer person. If Greek officials want their own happy ending (they get the money and the country doesn't go bankrupt), they must change their behavior. The universe isn't poised to intervene favorably on Greece's behalf.

IMF's Lagarde considers Greek exit a possibility

Published: May 29, 2015 2:49 a.m. ET

Market Watch

FRANKFURT--The managing director of the International Monetary Fund considers a Greek exit from the eurozone a possibility, but such a step probably wouldn't mean the end of the euro, she told German newspaper Frankfurter Allgemeine Zeitung.

Time Politicians Handed Greece an Ultimatum

Time may have come for the eurozone to offer Greece a political solution

By SIMON NIXON

May 27, 2015 4:43 p.m. ET

The Wall Street Journal

The Greek government has spent the past four months demanding a “political solution” to its debt crisis. The time may have come for the eurozone to offer it one.

Until now, Europe’s political leaders have been reluctant to be drawn into the process, preferring to hide behind the officials in the institutions formerly known as the Troika: the European Central Bank, the International Monetary Fund and the European Commission. Partly, that reflects practical and legal reality: elected politicians do not have the capacity or capability to negotiate the details of bailout programs.

ECB Says Contagion Risk Exists If Greek Deal Not Reached Quickly

by Jeff BlackAlessandro Speciale

11:55 AM EEST

May 28, 2015

Bloomberg

Yields on sovereign debt issued by other euro-area countries could rise if an agreement on Greece’s bailout isn’t reached soon, the European Central Bank said.

U.S. urges EU, IMF to be flexible with Greece

Wed May 27, 2015 12:31pm EDT Related: GREECE

LONDON | BY DAVID MILLIKEN AND JEMIMA KELLY

Reuters

The United States urged international creditors to show more flexibility in negotiations with Greece's cash-strapped government to avert a possible Greek default and exit from the euro zone with incalculable consequences.

U.S. Treasury Secretary Jack Lew issued the warning on Wednesday in a stopover in London on his way to a meeting of Group of Seven finance ministers in Dresden, Germany.