The audacity of no hope creates strange and interesting political behaviors and a willingness to take on unimaginable risks. Today, Greece seems to be surrendering to a debt agreement that will stop the drama, but not entirely end the country’s seemingly hopeless economic situation and debtors’ prison. A few days ago, the unanswerable question was if Greece would leave the euro and the European Union.
Political analysts are now asking: What kind of existential game was Greece playing during the six-month standoff with the EU? As of late last week, it was not at all clear that it would end this way. Why? Game theory gives us some insight.
Game theory is a formal study of strategic decision-making. It is how mathematicians, political scientists, defense specialists, economists and others try to predict or create desired outcomes. The recently deceased John Nash was a master game theoretician who, as depicted in the movie “A Beautiful Mind,” showed that “every man for himself” was not the way a group of guys could pick up women in a bar. How was this relevant to Athens’ predicament? Game theory shows a way.
In my most recent column, I wrote that Greek Prime Minister Alexis Tsipras lied, promising to open Greek banks 48 hours after last weekend’s national referendum that rejected European loan terms. I said the banks would not open. They still have not. Yes, Tsipras lied about this.
One thing I did not understand, however, is that in high-stakes poker, “lying” is not the same as lying in daily life. In cards it is called “bluffing.” Game theories tell us that poker players raise the stakes, play bad hands, fold good hands and regularly take things to the limit and beyond in order to win. I am not a poker player. Alexis Tsipras is. Big time.
Tsipras took 11 million Greeks and the European Union to the edge of disintegration and catastrophe, gambling Europe would not abandon Athens. “There is no Europe without Greece,” said Gianni Pitella, the leader of the European Socialists. Tsipras wagered most Europeans felt that way and would sacrifice to prove it.
When Greek banks shut down June 28, I agreed with analysts and German newspapers that declared it “game over” for Greece. For Tsipras and former Finance Minister Yanis Varoufakis, an academic and author of a game theory text, negotiations were just entering a more intensive, higher stakes, all-or-nothing endgame phase. In fact, the Greek negotiating team brashly stated that the moment they walked away from the deal on the table, negotiations had really only just begun.
An IMF default was only a few days away. ATM and gas lines grew. Elderly pensioners were stuck without monthly stipends. The political pressure was on. Game over?
With an exasperated populace and a radical left leadership calling EU politicians blackmailers, extortionists and terrorists, Tsipras raised the rhetorical temperature and inflamed his negotiating partners’ ire. The prime minister further raised the stakes and held a referendum – a rare and risky political gambit that gave him 61.3 percent of the country’s popular support. The decisive referendum victory for Tsipras both supported his insistence for debt relief and, absent credible domestic political opposition, solidified his leadership in Greece.
Gambling so much, so cavalierly, was certainly unfathomable and frustrating for EU leaders like German Finance Minister Wolfgang Schäuble. Such astronomical risk-taking is incomprehensible to most. Tsipras went as far as playing a geopolitical card by flirting with Vladimir Putin’s Russia. His team filibustered meetings and flustered EU partners. He incessantly called and texted Germany’s Chancellor Angela Merkel and European Commission President Jean-Claude Juncker.
Tsipras’ actions denied all European leaders a real summer vacation. Affably, Tsipras and company came to summits seemingly unprepared and refused to budge on pension “red lines” or debt forgiveness. Tsipras then doubled-down that the EU would be the first to fold. EU leaders called his team “clowns.”
Polls showed about 80 percent of Greeks opposed abandoning the euro or the EU, and strengthened the prime minister’s hand. Tsipras recognized this and used EU rules against a decision-averse, consensus-driven EU itself. He exploited constitutional European rules prohibiting the removal of countries from the eurozone. What was once a European potential safeguard against nationalist anti-euro sentiment became a noose around the necks of 18 other currency union partners. Tsipras tightened that noose to improve his odds.
The winner of this “game” is now clear. Tsipras unexpectedly and suddenly raised his stature to statesman and finally acquiesced to the onerous demands of the Europeans, capitulating to a rigged financial system that rewards banks and punishes people. All this happened very late in the game.
Prior to this, most calculated that Tsipras had little leverage over his creditors. What he tried to exploit instead was a gambler’s leverage, betting that Europe would not call his bluff up until the last moment when he backed down.
Prior to blinking, this gambler politician felt he had leverage by exploiting EU rules binding everyone tightly together. If Greece went over the cliff, Tsipras reasoned and argued, he was ready and willing to take everyone else with him. The U.S. engaged diplomatically to make sure that this outrageous proposition would not be tested.
Politics, as Democratic House leader Nancy Pelosi has said, “is not for the faint of heart.” Tsipras’ actions for half a year proved this and also provide deep insight into a gambler’s heart.
Tsipras will likely walk away with an agreement that buys his country time, but also political and financial pain, with Greek economic growth and debt relief seeming far off. The good news? Tsipras walked his country away from the ledge and back into the EU house.
In January, Tsipras pulled out a political revolver, a single chamber loaded with a silver bullet – a threat against EU unity and global stability. The Greek leader’s gamble was a game of Russian roulette. America’s allies should be thankful the gun did not go off.