A games theorist (Karl Strobl) explains why there is no real choice but to deal honestly with the Greek government.
Greece cannot pay. If Finanzen 100 in Germany is to be believed,Greece is the only country in the EU that has actually reduced its debt in absolute terms between 2011 and 2014! It has taken the medicine and has taken the pain that Europe has asked of it. Just go and visit and look around. But because the economy has been shrinking so much faster than its debt, the debt has nonetheless become even more unsustainable. This must stop, and this is the message on which a hitherto untested party spectacularly won the election.
So to everyone in the Eurozone, I say it’s time to get over it, get on with it, and work with these guys. It’s the best shot you have. If you want to resolve things, stop humiliating the very guys who are your best chance of doing it and who didn’t have their hands in the cookie-jar. Or just have the guts to pull the plug.
With the current tried and tested approach of squeezing Greece to the max, blaming Greeks, and then lending just enough money to survive another day, we’ll lose the will of electorates in and outside Greece to go on with the show.
Read the full article Varoufakis and Game Theory.