Memo to Varoufakis: Game theory is fine, but this isn’t a game.

varoufheadlinghts  Yanis Varoufakis was caught in the headlights last Friday: he should stop denying it

The anti-‘deal’ leaks from the ECB, Berlin, the IMF and Brussels have been in full flow since Tuesday evening. It’s all terribly predictable: a clever process of suggesting that – purely out the goodness of their hearts – Troika2 is going to cut Greece some slack….even though T2 has – to tot up the list to date – ‘grave doubts’, ‘major reservations’, ‘worries about the lack of detail’, and ‘concerns about achievability’. There is slack rope, and there is enough rope to hang oneself.

The stench of hypocrisy in all this is vomit-inducing: Greece is being set up to fail, and in the meantime the ECB will continue its covert policy of creating bank cash-flow problems…ensuring that Syriza comes across as a Skid Row lush dependent upon never-ending welfare.

From Yanis Varoufakis, the Master of Game Theory, there has been little since the sign-off beyond rationalisation. In an interview with the Irish Times’s Damian Mac Con Uladh today, Mr Varoufakis gives us:

“Good compromises don’t always satisfy everyone, and leave in a sense everyone somewhat dissatisfied. But the mandate from our party, our government and my prime minister was very straightforward. To get a deal done. So, compromise. The question is if we have compromised our basic principle. And the answer is a big, fat no….Our mandate was to struggle against this black and white, this either/or, and to create a third way….It’s a triumph for democracy and marks the end of automated austerity….Anything is better than confining us to an austerity hole where we shrink every day.”

Compare and contrast that entirely reasonable attitude with this BBC interview on February 3rd:

“”Europe in its infinite wisdom decided to deal with this bankruptcy by loading the largest loan in human history on the weakest of shoulders… What we’ve been having ever since is a kind of fiscal waterboarding that has turned this nation into a debt colony….[the Troika is] a committee built on rotten foundations…Greek democracy has chosen to stop going gently into the night. Greek democracy resolved to rage against the dying of the light….We are going to destroy the basis upon which they have built for decade after decade a system, a network that viciously sucks the energy and the economic power from everybody else in society.”

I’m being ironic: I vastly prefer the second (earlier) Varoufakis to the new relaunch. Today’s Irish Times interview shows Damian Mac Con Uladh giving Yanis an unbelievable easy ride on the subject of a fat, hairy mammoth in the room: the now well-documented way in which the Greek Finance Minister was ambushed by the Euromafia at 4.30 pm last Friday.

I recognise perfectly well that I’m breaking from the optimist pack, but then I do understand the sociopathy of that Mafia better than most Greeks. To be blunt, I think Varoufakis underestimated it; and last Friday, the breathtaking, bullying illegality of their input caught him napping.

I do not believe Syriza has bought time, I think it has sold principles. I’m sure Yanis knows all the tricks of Game Theory, but this is not a game. He is dealing with (as are we all sooner or later) a nasty and yet hopelessly splintered EU oligarchy of far greater venom than any existing in Greece. The division on the opposing side is what he missed.

It’s easy to define, and even easier to evidence: the Germans are fed up of the French, and losing faith in the Americans. That’s a very serious split, because the man with the most unaccountable power in the eurozone is Mario Draghi….who works for Wall Street. The French, meanwhile, bitterly resent the idea that a nasty piece of work like Wolfgang Schäuble will be eyeballing them during March…and if and when FiskalUnion ever comes to pass, telling them what they can and can’t spend 24/7. The idea that Paris has the remotest desire to acquiesce in that arrangement is ridiculous. Apart from anything else, it would hand millions of votes to both Marine Le Pen and Nigel Farage.

On top of that we have a general trend in Southern Europe towards euroscepticism: the continuing growth of Podemos in Spain, and europhobic Berlusconi attitudes in Italy. These can only be encouraged by a flat refusal by Greece to deal with the idiots who caused the problem in the first place.

This is the perspective from Syriza that I find flawed: the much bigger picture. Last week, Varoufakis focused on it, and then lost the plot on Friday. He was a refusenik, but now he’s a pragmatist.

The post I wrote earlier this week laying out the story behind this was taken down by the Blue Meanies. I am therefore eternally grateful to the half-dozen Sloggers who still had it open and used page capture to return the piece to its rightful owner. It is reproduced below for anyone who missed it first time around.




Conflicting rumours surround the Syriza reform programme approval process tonight, but whatever emerges from this farcical trading of angels on a pinhead, I’m increasingly concerned as details of the humiliation process programme ‘deal’ accepted by Yanis Varoufakis last Friday come to light. I don’t actually think the five-point italic hand-tying target codicils matter a damn to be honest, because they’re all unachievable anyway.

Far more relevant is what EC behaviour has been found acceptable to the Greek Government.

Did you know, for instance, that both the Gang of Four revisions, the Friday ambush, and the ELA threats/leaks to Greek banks were driven by Draghi?

Did you know that – in a direct sideswipe at rehiring Ministerial cleaners – there is a blanket ban under the agreement on any more public sector hiring?

Did you know that, just to rub in really hard that how they think the Greeks shit on their shoes, eurogroup told Varoufakis Friday that they were “handing over the judgement process to the organisation formally known as the Troika” – Draghi’s exact words. This was a direct hit on Syriza’s refusal to deal with the Troika. “Eurogroup will leave the details to this institution, who will present their view to eurogroup” he added.

Varafoukakis told CNN this evening that it was eurogroup who wanted more time to think, not the Troika. That is very, very economical with the truth – and not how other Syriza officials see it. The Troika has made it clear to eurogroup there are things they don’t like. As Naked Capitalism reported yesterday, ‘The Greek government is required to submit a list of reforms to the Troika by the end of day Monday. If it is not approved, the Eurogroup will meet on Tuesday.’

Guess what? Earlier this evening, Greek Channel NERIT announced that the eurogroup has asked Greece to submit a revised reforms list for its meeting Tuesday morning. The Guardian carries the same story.

I’m sorry, but at the minute Yanis Varoufakis isn’t coming out of this very well. For now, I support him to the hilt: but he is either going to resist the EC/ECB/creditors Troika or he isn’t. I know perfectly well that there are many among Athenian opinion-leaders who disagree with me about this. So perhaps – to illustrate the point – I might be allowed to relate an infamous Churchillian anecdote.

In the mid 1920s, WSC found himself seated next to a lady of liberal leanings at supper. Glad to have this arch anti-Communist to herself, the socialite took him to task about strike breaking, dissembling newspaper articles about the working class, and several other genuinely unpleasant dimensions of Churchill’s curate’s egg of a personality.

As ever when in the presence of what he regarded as uppity suffragettes, Winston was cutting and dismissive, telling the woman she should stick to worrying about her children and suitable marriages for her daughters – while remaining grateful for the fact that Britain had unwisely given her the vote.

“Mr Churchill,” said the shocked supper companion, “If I were married to you, I would put poison in your wine”.

“Madam,” Churchill lisped, “if I were married to you, I would drink it”.

Think of this as the “Drop dead” period of Syriza/EU insult exchanging immediately following the election.

Back in 1927, this not entirely auspicious exchange rapidly deteriorated, such that by the time pudding arrived, the lady concerned had reached the end of whatever short tether she possessed.

“Mr Churchill,” she said loudly, “You are the last person in the world I would ever marry”.

“Madam,” WSC responded, “A small part of marriage involves procreation in the bedroom. In order to show you what my real intentions are, under what circumstance would you consent to sleep with me?” The mortified woman hesitated, and then replied.

“There is no amount of money on Earth that would so persuade me”.

“Not even,” asked Winston, “£10 million?”. She laughed out loud.

“Don’t be ridiculous, that’s more than the Poor Relief budget. No woman is worth that”.

“Very well then,” said the future war leader, “Shall we say £500?”

“That is an insult,” she responded, “what do you take me for – a common prostitute?”

“Madam,” said Winston Churchill, “We have already established your profession. At this stage, we are merely haggling about the price”.

Fast forward to 2015: that’s what has been going on since Friday afternoon between Syriza and the Troika.

I don’t buy the “lose the battle, win the war” argument. While the Troika, Wall Street, US economic colonisation, EU fascism and banking sociopathy are indeed the enemy, this is a peace time exchange, not all-out war – yet. A strategic retreat is one thing: preparedness to cling to the driftwood of credibility is merely appeasement.

I’m now informed – in the last twenty minutes by a well-placed Syriza source – that fully eight Greek Cabinet members are opposed to acceptance of the deal. For myself, I feel cheated and made to look stupid by the hidden facts and cynical spin that followed Friday’s little re-enactment of the 1938 Munich crisis. But my feelings don’t matter a jot: let  The Slog’s Saturday post stand as a testament to rushed judgement. More to the point is the reality that an opportunity to call the Troika bluff has been blown.

If Yanis Varoufakis wants to regain his dignity – and keep Syriza together – he needs to think very carefully about what Prime Minister Tsipras should be asked to accept tomorrow…and then sell to his Party. For what will it benefit a man if he buys time, yet sells his soul?


25 thoughts on “Memo to Varoufakis: Game theory is fine, but this isn’t a game.

  1. The bank run in Greece is gathering momentum. Grexit is inevitable. The German taxpayer has been taken to the cleaners. Forget the Troika and Syriza. The market is the master of events.


  2. Actually nothing happened on Friday. If you and I recognize that we have differences and agree to resolve them in 4 months from now there is absolutely no guarantee that such differences would be bridged or that we would be able to agree in 4 months.

    Greece is lacking cash and the EU has other political problems like the collapse of Ukraine.

    To put it simply, it was not a convenient time for either party to declare a “do or die” moment. Such would come later.


  3. Such happens to be grand lie, since the German taxpayer has not even paid a cent.

    Grexit is an invented term for terrorism purposes. If Greece is forced to default – due to German intransigence – it will default within the euro because to put it simply there are no mechanisms for the so called “Grexit”. Existing treaties don’t allow it.

    What you have to ask here is a simple question: Is it worth it for a Schauble ideological preference to induce Greece into default? Because the way things are Berlin is talking about “reforms” which have proven to be a disaster in practice.

    And since 95% of the funds Greece receives are used to rollover existing european loans which reach maturity you then have to ask the other very simple question:

    Why would Greece further distress and squeeze itself towards providing a benefit for others and not herself?

    Because it should be abundantly clear by now that the so called “bail out” or “rescue package” was aimed at supporting German and French banks and not Greece.

    Greece has been sacrificing itself for 5 long years in order to keep the euro together, in other words to allow Germany to use an artificially low value euro as a means of maximizing her exports. Why would Greece do this? What in it for Greece?


  4. “These (SYRIZA, Podemos & Co.) can only be encouraged by a flat refusal by Greece to deal with the idiots who caused the problem in the first place” – I beg your pardon! Who has caused the problem in the first place? Just in case you don’t remember, just a few points:

    * from 2001-2010, the Greek economy received almost 300 BEUR in net debt inflows and about 50 BEUR in EU subsidies.
    * if only a decent part of those capital inflows had been used for productive investments, Greece would be a star today.
    * if long-term debt is used to finance short-term consumption, it’s like taking a loan for a trip around the world. When you return, the fun is behind you but the debt is still there.
    * the bail-out did NOT increase Greece’s debt! It only refinanced debt owed to private creditors. The debt was already there. If anyone should complain about this bail-out of the banks, it should be the tax payers of the countries funding the bail-out.
    * despite the much referenced ‘overindebtedness’, Greece has to allocate less than 10% of government revenues to debt service. That is a rather low percentage and certainly lower than in other periphery countries (and about the same level as Austria or Germany). What the heck is so unsustainable about that? (when Greece was really in financial trouble with the bankruptcies of the 19th century, close to 50% of government revenues had to be allocated to debt service!). Furthermore, with clever and responsible negotiations (instead of game-playing theories), that percentage could definitely be reduced quite a bit more. Regrettably, some people think insulting potential supporters is a clever and responsible form of negotiation.
    * a 25% drop in GDP? A drama? That depends what you compare it to. If you compare it to the pre-crisis level, you have to ask whether the pre-crisis level was a fitting assessment of GDP. When 30-35 BEUR enter an economy the average size of about 200 BEUR year after year, the water level rises and everything which swims on the water level (asset prices, wages, salaries, pension, etc.) rises with it. When the rise is debt-financed, the rise is a fiction. When the debt flow stops, the GDP collapses to more realistic levels. I remember analyses of the time which concluded that the Greek GDP was inflated by about 60%. If that was correct, Greece’s GDP still has a way to go downward.
    * one has to remember that if a poor man hits a 10 MEUR jackpot and decides to use it all for consumption, and if he spends 1 MEUR annualy, he will live extremely well for 10 years (and so will his community where he spends the money). After 10 years, when the money is gone, he has to return to the living standard of 10 years before (or find a new source of income). And his community wll also have less income. That’s common sense.

    I rest my case.


  5. How would this equate to the market being the master of events william?
    ‘Ex-Plunge Protection Team Whistleblower: “Governments Control Markets; There Is No Price Discovery Anymore”‘
    Dr. Pippa Malmgren – a former member of the U.S. President’s Working Group on Financial Markets – it is not conspiracy theory, it is conspiracy fact: “there’s no price discovery anymore by the market… governments impose prices on the market.”


  6. Maybe the Greeks will cry uncle and abide by the conditions demanded; maybe they will leave the eurozone and that will serve as a needed purge that will make the remaining union stronger and more aligned and all will be fine. But then again, maybe not, with quite unpleasant consequences and not just for Europe. The price we would all then pay for the ideology of austerity would be large. That may a risk the German government and others are willing to take, but it is one that the rest of the world should resoundingly and loudly reject.
    Zachary Karabell is head of global strategy at Envestnet and author of The Leading Indicators: A Short History of the Numbers That Rule Our World. He is a contributing editor at Politico Magazine.

    Read more:


  7. The real problem of Greece is that rain or shine, year in and year out, Germany has such penetration into the Greek market that regardless of economic conditions it outsells Greece by 3.3 Billion euros or so on a consistent basis.

    What is so remarkable about such Greek chronic trade deficit with Germany is by adjusting its rate of Greek imports Germany manages to maintain Greece in a constant subordinate and disadvantageous position: (click on table )
    And to show how contrived the German ownership of Greece is, one has to look no further than the US trade where Greece has managed to overturn chronic trade deficits into trade surpluses:

    All it takes in trade relations is a willing partner to help Greece. Whereas the United States have chosen to support Greece in this hour of her need, Germany has elected to keep its brutal boot on Greece’s throat just because.


  8. Pingback: John Ward – Memo To Varoufakis: Game Theory Is Fine, But This Isn’t A Game – 26 February 2015 | Lucas 2012 Infos

  9. I expect in 2 months time an anguished Yanis Varoufakis, copying Manolis Glezos, in giving a public “Please forgive me I was conned” speech to the Greek Public as Dragula and company continues their remorseless squeezed. I predict based upon what they have already published that Golden Dawn will take full advantage of this situation and will triple in size and support. However since I do not know the specific mechanisms that can trigger another Greek election, I cannot predict how the future power struggle will go,
    So let me end like the narrator on an old TV Drama series; ” Will Tsiparis reorganize Syriza on more anti EU grounds or will he struggle with the other socialists of the EU to try and change the political direction of that organization?? Will UKIP force the UK out of the EU?? What will be the next nation to default under Draghis remorseless bloodsucking?? Stay tuned to this channel for the next exciting edition of “As the world falls apart”


  10. Well, there is a lot going on here .’DP’ says ‘ the German taxpayer has not even paid a cent’. True, so far. Grexit will involve a massive, if not 100 percent, debt repudiation, As for kfc1404,might I point out that within this single currency zone, where sovereign risk should not in theory exist, nobody will lend to Greece. I wonder why. But the market will lend to a crippled France. The market is master of events, as 8 May is going to give the Cabinet Secretary a particular shock, when there is no PM, no coalition, no majority party, the SNP in your face, an immediate run on sterling, and a PSBR of a mere £ 80 million, when nobody wants to hold sterling. Good luck with that, Osborne or Balls, our PPE masters.


  11. At another dinner a lady was wearing on her embonpoint a fine broach in the shape of an aeroplane. Noticing that Mr Churchill was staring at her she said: ” Mr Churchill are you admiring my aeroplane?’ He replied: “No madam I’m merely admiring the aerodrome….”


  12. The Greeks, along with other ‘poorer lower class countries invited to join the EU’ were offered free money- they took it- they spent it- they do not want to pay it back! so what do you do? Is Merkel biting her nails? We are already offering FREE UNI education to all in the EU…free,free,free! As a major contibutor we should refuse to pay also.hmm


  13. Why do we keep avoiding an unpleasant fact here. No matter what someone or some group says when it is not in power, when it gets into power it cannot do much of anything. I have read JW’s analysis of Marine Le Pen and his conviction that she and her group are different. Maybe. We should not underestimate the desperate power of the ‘Status Quo’. Their ability to distort every principle to maintain their position should be amply demonstrated in what is going on in the US, Japan, UK and EU.
    I hope that YV and Tsipras have outstanding protection if they decide to have a real crack at it.


  14. Varoufakis’ knowledge of game theory seems flawed. There is no point in bluffing if your opponent knows that you are bluffing, because he will call your bluff. This is GCSE level game theory, not university level. Varoufakis appears to be one of those people that universities are full of: people who use learning to hide the fact that actually they are a bit stupid.


  15. Pingback: Memo to Varoufakis | Doomstead Diner

  16. chrisb,
    Or academics who are highly educated but have no inkling of the real world. Like Bernanke, Yellen, Summers et al.



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