A Deal For Greece Needs European Consensus

Radical left parties rarely get a chance to rule countries. On January 25^th, SYRIZA became the first ever radical left party to win elections in Greece. This is an occasion that spurs hope for progressive political change in Greece and Europe. At the same time, it is a major cause for concern. How can politicians who have never been in power propose a realistic political plan? Well, one answer is that they will do as long as they learn quickly. In the current negotiations Greece is conducting, however, they should speed up the process of learning.

SYRIZA was elected on the promise of a complete renegotiation of its economic bailout plan. Greek Finance Minister Yanis Varoufakis, Professor of Economics, carries the burden of leading negotiations with Greece’s lenders, beginning with its European counterparts. In his first meeting with Jeroen Dijsselbloem, head of the Eurogroup, he made it clear that he would not deal further with the Troika. Both he and PM Alexis Tsipras declared publicly that they are bound by the will of the Greek electorate to end austerity and reject economic policies that are being implemented on the say-so of the Troika.

This tactic naturally disturbed EU leaders, including President of the European Parliament Martin Schulz, who said that any possible arrangement can only be achieved through consensus, not provocation. Being immersed in game theory, Dr. Varoufakis could very well argue that provocation and reliable threat is the name of any bargaining game. One only has to take a swift look at The Strategy of Conflict, the classic book by Economics Nobel laureate Thomas Schelling, to get a handle on Greek bargaining tactics. By constraining the choices for Greece, Dr. Varoufakis made what Schelling calls a “strategic move”. Setting out in advance a mode of behaviour that rejects the Troika and austerity measures leaves the rest of Europe with a simple maximization problem: either succumb to Greek demands or let Europe go down a slippery slope of crushing the economy of one of its member countries.

This tactic has set up an interesting type of chicken game, which is often compared to two vehicles set on a collision course. Dr. Varoufakis’s announcement that he will not retreat can be likened to his breaking the wheel and throwing it out of the car while driving toward his opponent. Left with no other choice, his opponent would have to swerve and let him win. But there is one catch to this tactic: Commitment must be credible. Obviously, breaking the wheel of his car is something Dr. Varoufakis could never reverse. On the other hand, breaking his promise to his electorate is something that can easily be done. Politicians do it all the time (granted, Dr. Varoufakis has been a politician for only 10 days). If the ECB, on which the Greek government is counting, decides to call his bluff (see events yesterday evening), things could take a steep turn for the worse. Yanis Varoufakis might find possible ECB hardline tactics illegitimate, but he should be reminded that he started driving a small car against a train (which, apart from its size, does not swerve easily) in a very risky, dangerous, chicken game.

Anyway, these hardball negotiation tactics were perfectly suited for the arena of international negotiation when Schelling’s book was written, during the Cold War. Since then, they have definitely gone on the back foot, giving way to a more cooperative view of negotiation. Mutually beneficial outcomes, aka win-win outcomes, are now portrayed as the ultimate desiderata of negotiations. Dr. Varoufakis did start off with some hardball negotiating tactics but subsequently also used win-win rhetoric to alleviate initial worries among his European counterparts. He claimed that his concern is not necessarily for the Greek citizen, but for the average European citizen who should not be asked to carry the burden of unsustainable Greek debt.

Nevertheless, he has not backed down from his original game-theory strategies. But even if he completely switches to win-win reasoning, his proposals will not resonate well with the rest of Europe. Win-win or game-theory tactics all appeal to interests, which are not the sole determinants of negotiation, according to a consensualistic view of negotiation (see my new article in New Ideas in Psychology). According to this approach, negotiation goes far beyond interests. Imagine, for a moment, negotiating with a dealer the purchase of a car. Ideally you would want to get the car for free. The car dealer, on the other hand, might ideally want to sell it for a million dollars or even, why not, for a billion dollars. Wants are limitless. However, these interests and desires do not necessarily determine the course of negotiation. In fact, negotiation will be mostly determined by the norms and rules that people find relevant in a specific interaction, such as the price offered in other stores or prices that simply seem “fair.”

German finance minister Wolfgang Schäuble was not wrong when he said: “Elections change nothing. There are rules”. What Greek people want during negotiations is not all that matters. What really matters is what all Europeans can agree to. It might appear reasonable to talk about Greek interests, even German, Italian or Spanish interests, but it is also reasonable to talk about the European norms that should be applied and the previous agreements that the Greek people have committed to. Talks do not only revolve around the wants and the needs of the Europeans, but also around the terms they have agreed to govern themselves by.

These terms are inextricably attached to the vision of a unified Europe and govern a slow moving process toward political integration. Negotiation among European countries is ongoing, often suffering considerable setbacks through economic difficulties and the consequent rise of far-right dreamers of European disintegration. Europe has a duty to combat these pressures, irrespective of short-term economic difficulties. In light of these concerns, Greece has a responsibility to avoid confrontation, threats and outdated game-theory strategies, which poison the foundations of the EU to the delight of its opponents, such as Marine Le Pen. Possible agreement on the restructuring of its debt lies in strengthening the regulatory framework of the European Union and supporting its political integration. It is only through a groundbreaking future agreement on the central management of European debt that Greece may win the sustainable economic future it craves. Towards attaining this goal, the European flag should be raised even higher than its own national flag.

After all, negotiation is far more than a vehicle to satisfy the interests of individual member countries. It is the process through which Europe defines the rules of interaction among all countries, often making provisions for ethical and justice concerns. Irrespective of what the Greek, the German or the Italian financial situation is, negotiation for the Greek bailout plan is also a negotiation about European rules and further political integration. There is no place in this negotiation for strategic moves by either side and certainly no room for an outdated chicken game. It is time to step on the brakes.