
Why Greece and the EU aren't playing games - steve19
http://www.bbc.com/news/magazine-33863913
======
powertower
Its amazingly simple how entire countries can be taken over like this...

Step 1. Bring foreign banks into country and proceed to make loans that are
known obviously to be non-repayable. No one says "no" to free money.

Step 2. Keep doing this until a debt crisis is reached.

Step 3. Have the bank-and-currency related foreign country and/or entity
create a "bailout" package that fixes the foreigner bank ledgers. It does
nothing else, there is no relief except to the foreign banks.

Step 4. You now own that country, its resources, and all the people in it. You
just bought it.

~~~
kjksf
I don't see what is simple about this plan. It takes a highly irresponsible
government to borrow "obviously non-repayable" amounts of money for decades.
Greece behaved like a heroin user and you're putting the blame on rehab
clinic.

I also don't see what exactly you mean by "You now own that country, its
resources, and all the people in it".

Minus hyperbole, who owns what exactly?

If you read the terms of the bailout, it consists of prosaic reforms like
allowing shops to be opened on Sundays, eliminate rampant tax avoidance, rise
retirement age to merely match other Euro countries, stop hiring government
employees if you don't have the money to pay them.

And at the end of the day, the only way to enforce that Greece does those
reforms is to stop giving Greece even more money. Greece promised and failed
to deliver before.

Those are things that Greek government should have done long time ago except
they didn't, got in huge debt and now some people think that it's the lender's
fault.

~~~
danharaj
Greece should have been allowed to default.

That's why lenders make money. Because there is a risk of default.

Bailing out an irresponsible lender to turn the problem from simple finance to
geopolitics is not how you solve insolvency. That is how you use insolvency as
an excuse to undermine sovereignty.

> Those are things that Greek government should have done long time ago except
> they didn't, got in huge debt and now some people think that it's the
> lender's fault.

It's not the Greek people's fault either. Also, again, when a debtor cannot
pay, they default. They do not suffer arbitrarily at the whims of nations and
supranational institutions because it's been literally centuries since anyone
thought that bankruptcy meant that your autonomy and ability to go on with
life was forfeit.

Greece's economy collapsed by 25%. The people who structured the deal
predicted it would shrink less than 5%. Greece 'fails to deliver'; the people
who keep trying to collect on worthless debt fail to be reasonable or
realistic. The people who suffer are people who did not make the deals. People
have died because of austerity in Greece. For what? Your insipidly vindictive
morality?

> Minus hyperbole, who owns what exactly? > Greece behaved like a heroin user
> and you're putting the blame on rehab clinic.

Presented without comment.

~~~
harperlee
> That's why lenders make money. Because there is a risk of default.

Nope! Interest paid also covers more things, like inflation, opportunity cost,
and other risks. You could make money as a lender with zero default risk.

~~~
danharaj
Mildly interesting detail to elaborate on, but the essential point stands,
don't you think?

~~~
harperlee
Well I'm on mobile, so I can't really elaborate a lot, but I do think it's a
little bit more central to the case than you imply. This was a european
country's sovereign debt, so default risk was expected to be very low, and
there has been financial information manipulation, and in those cases people
do not just default, but might be also prosecuted.

This is a complicated scenario, so simplifying definitions to make a point can
end up biasing the result a lot. If it's your chain of reasoning, great; but
if you publish it, it's best if you strive to be as complete and transparent
as possible:
[https://news.ycombinator.com/item?id=9996843](https://news.ycombinator.com/item?id=9996843)

------
Natsu
This says we can't use game theory to analyze this situation, but the only
argument given in support is that humans aren't rational. "Irrational" (or
otherwise emotional) strategies are by no means outside of the analysis of
game theory. It's well known that by "irrationally" eliminating one of your
choices, you can push your opponent into different options.

For example, take this infamous episode of split or steal:
[https://www.youtube.com/watch?v=S0qjK3TWZE8](https://www.youtube.com/watch?v=S0qjK3TWZE8)

One side makes a choice to go with perhaps the most "irrational" choice. But
if you think about it for a bit, it's obvious that they end up guaranteeing
the better choice for both parties by being less greedy than they might be.

Anyone interested in the topic of rationality as it pertains to game theory
might also like reading this:
[http://www.dklevine.com/archive/refs4375.pdf](http://www.dklevine.com/archive/refs4375.pdf)

~~~
bduerst
Well said - the point the article missed is that the politicians in the E.U.
are still behaving rationally, even if the countries are not.

If the politicians agree to an austere fiscal policy with the Euro, it will
mean setting their economy back in a very visible manner and jeopardize their
re-election chances. The countries in the E.U. are still very nationalized,
and competing political incumbents will be able to spin the policies as
sacrificing their own country for someone else's mistakes.

The politicians are still acting within their best interests to keep their
jobs, even if that means sinking the Euro.

------
com2kid
The amount of money here seems so laughable.

The EU is crippling Greece, removing their ability to ever restructure or
become a healthy economy, over what is piddling amounts of money.

Maybe I am just terrible at reading charts, but it seems to me that based on
[https://en.wikipedia.org/wiki/Federal_taxation_and_spending_...](https://en.wikipedia.org/wiki/Federal_taxation_and_spending_by_state)
the US spends hundreds of billions of dollars _per year_ supporting those
states that aren't "profitable".

The US would fall apart very quickly if the federal government insisted on
handing out loans and forcing the cancellation of aid and welfare programs in
states that needed help the most.

~~~
computer
What's at stake is not just the debt of Greece, but also Italy, Spain, and
possibly others. Forgiving Greece part of its debts sets a precedent for those
countries, raising the stakes greatly.

~~~
com2kid
It is a hard problem. Forgiving the debt once is likely the right thing to do,
but if you keep doing it, what is to prevent countries from just never paying
at all?

The sorts of restructuring plans that are put into place are designed to solve
this problem, but I think whoever designed them is a sadist.

It is said you cannot spend your way out of a recession (and I'd agree that
one off projects that don't kick start a continued source of income don't
work), but you also cannot make so many budget cuts that no one in the country
has a job, or a house, or a support network of any kind. Zero tax revenue does
not make for a stable government.

(It does make for a really corrupt one though, and a much worse type of
corruption than what Greece had before)

~~~
benmccann
If debt is forgiven or defaulted upon, then it becomes harder to borrow in the
future (i.e. they must do so at higher interest rates to account for the
risk). If countries never paid their debt then no one would loan to them or
would loan only at astronomical interest rates.

------
gull
_The euro is one such project. It was known in advance that it couldn 't
work._

Isn't it a bit extreme and possibly false to claim this? Was there a study
that the euro could not work, followed by a conscious decision to pursue it
nonetheless?

~~~
igravious
That's hardly the only sentence of that type in the article. In fact, I
disagree with quite a number of his starting premisses in the article. For a
philosopher he fails pretty hard at argument construction. One may ask oneself
why such failure. Sloppiness? Carelessness? Being agenda-driven? Ignorance?
Hmm, none very pleasant.

The whole article is far too simplistic, lacking in nuance, far too reductive.
It would benefit from attention to detail. But then it couldn't be quite as
dramatic, excitable and voluble.

Some, such as the UK, doubted the € was workable -- but as the project is
still in progress, as can be attested by the denominations of the accounts and
coin of many a person, we still have to wait and see. Whereas some said that
the conditions for entry mitigated the risks of failure. As things stand, the
UK is right, the project will not succeed -- given the current conditions and
economic trajectories. But, and it's a big but (hmm, never thought I'd write
that clichéd phrase), maybe the conditions for the project to work shall be
put in place. I, for one, certainly hope so.

------
wmil
A Greek exit was the right solution in 2005, in 2010, and again in 2015. It
won't happen so presumably we'll be talking about this again in 2020.

It's amazing how correct the UK "No" campaign was.

~~~
bduerst
It was impossible for Greece to exit, because the politicians elected at the
time were campaigning on using the lower interest rates of the Euro to fuel
government funded jobs and projects.

The more conservative politicians, who would have maybe had the foresight to
leave, were elected out of office by the people.

------
aikah
> Game theory can't explain the Greek crisis - the entire euro project is now
> in the hands of fate

The euro(the money) isn't born out of any necessity, it's purely an
ideological project. So it's no surprise it is destined to fail. The only
question now is, will it fail peacefully or not?

~~~
bduerst
The euro _is necessary_ for the E.U. to remain economically competitive
internationally. The problem lay in the implementation, and not mandating a
fiscal policy for membership (e.g. something similar the austerity measures).

"Game Theory" in the context of this article is assuming that all countries on
the Euro will rationally avoid mutual destruction. To do that, they all need
to agree to the fiscal policies that would have prevented Greece and others
from getting to the point that they're at now.

But that's not happening - there doesn't appear to be a universal fiscal
policy for the Euro in sight and they're heading for mutual destruction (i.e.
the countries are not behaving rationally and game theory doesn't apply).

~~~
aikah
> The euro is necessary for the E.U. to remain economically competitive
> internationally

That's bull. Norway, UK and others are doing pretty fine and they do not have
the euro. France,Spain,Italy,and Greece are a complete disaster,only Germany
is doing really well and it's clear it has nothing to do with the euro.

> The problem lay in the implementation, and not mandating a fiscal policy for
> membership (e.g. something similar the austerity measures).

Oh yeah, Euro is broken , so what do when need? more Europe, more power in the
hands of a few ... no we need to get rid of that stuff asap and less
concentrated powers.

There was no need for a monetary union. At all. It didn't bring back all the
industries, it didn't create jobs (10% unemployment in my country,...) , it
served no purpose at all.

~~~
vilmosi
>>> Germany is doing really well and it's clear it has nothing to do with the
euro.

Germany is doing fine particularly because of the euro. They can have very
cheap exports because of it. When a single currency represents vastly
different economies, it's obvious the rich get richer and the poor stay
poorer.

Of course, the euro was only meant for countries with comparable economies.
Too bad Greece basically lied to adopt it. And now Germany has every reason
possible to keep weaker economies in the fold for its own benefit.

