17 Feb 2015
Greece / Eurogroup playing the game - Rabobank
FXStreet (Guatemala) - Jane Foley, Senior Currency Strategist at Rabobank explained, in respect of Greece, that game theory in economics is based on players trying to optimise their outcomes.
Key Quotes:
"Greek Finance Minister Varoufakis is an expert in this field and in his negotiations with the country’s creditors his optimal outcome will be the best deal that he can manage for the Greek electorate. This means he will continue to press hard for some relief from austerity. He does not succeed in placating the voters than the new Greek government is likely to be judged a failure."
"Given this set of circumstances, it would seem unlikely that an elected Greek official can accept a compromise agreement without pushing the negotiations to the wire first. Given the favourable bailout terms that were already given to Greece in 2012 and desire of some politicians the suppress the rise of hard left factions elsewhere in Europe there is little reason for the Eurozone finance ministers to play anything other than hardball either."
"However, it is in the interest of both sides that an agreement be made. It must be remembered that the Greek electorate favours remaining within EMU. While the new Greek government has been elected to ease the terms of its bailout, it must eventually compromise since a Grexit exit would also be a failure. Every step made towards an exit for Greece from EMU increases the risk of a full scale Greek bank run and a breakdown of liquidity provision."
"If Greece were to leave EMU, the financial chaos that would follow could also spell the end of the Syriza led government. For this reason it remains our central view that an eleventh hour compromise between Greece and its creditors is still likely and that the chances of a Grexit are still moderate."
Key Quotes:
"Greek Finance Minister Varoufakis is an expert in this field and in his negotiations with the country’s creditors his optimal outcome will be the best deal that he can manage for the Greek electorate. This means he will continue to press hard for some relief from austerity. He does not succeed in placating the voters than the new Greek government is likely to be judged a failure."
"Given this set of circumstances, it would seem unlikely that an elected Greek official can accept a compromise agreement without pushing the negotiations to the wire first. Given the favourable bailout terms that were already given to Greece in 2012 and desire of some politicians the suppress the rise of hard left factions elsewhere in Europe there is little reason for the Eurozone finance ministers to play anything other than hardball either."
"However, it is in the interest of both sides that an agreement be made. It must be remembered that the Greek electorate favours remaining within EMU. While the new Greek government has been elected to ease the terms of its bailout, it must eventually compromise since a Grexit exit would also be a failure. Every step made towards an exit for Greece from EMU increases the risk of a full scale Greek bank run and a breakdown of liquidity provision."
"If Greece were to leave EMU, the financial chaos that would follow could also spell the end of the Syriza led government. For this reason it remains our central view that an eleventh hour compromise between Greece and its creditors is still likely and that the chances of a Grexit are still moderate."