Lessons from the Greek crisis

ABSTRACT

There are two features of the Greek crisis that need explanation: the lopsided outcome where Greece did not achieve any of its stated goals; and the protracted negotiations. I explain these two features as results of two factors: Nested Games (the Greek prime minister was also involved in a game inside his own party); and incomplete information (the Greek government did not understand the weight of unanimity to change the status quo in the EU, and did the best it could to create a unanimity, of all the other countries, against it). The lessons from the crisis are two-sided: for the Greek side not to lose any more time in the application of the agreements (say, with elections); for the EU side to consider different ways of forming and aggregating preferences: having elections (with a wide EU constituency as opposed to national ones), and making decisions (eliminating the unanimity requirement).

KEY WORDS:

• Bargaining
• constitutional rigidity
• EU crisis
• Greek crisis
• nested games
• veto players

ACKNOWLEGEMENTS

I would like to thank Nikos Alivizatos, Barbara Koremenos, Vassilis Tzevelekos and Stavros Tsakyrakis, for useful comments. Jeremy Richardson and one anonymous referee greatly improved the manuscript. I thank also Jean Clipperton, Heather Elliot and Hyeonho Hahm for research assistance.

Notes

1 The article is written a couple of weeks after the agreement in the end of July 2015 and submitted on 22 August 2015.

2 Available at http://www.nytimes.com/aponline/2015/07/07/world/europe/ap-eu-greece-bailout-the-latest.html?_r=0 (accessed 6 August 2015).

3 https://www.foreignaffairs.com/articles/europe/2015-03-26/syriza-stumbles.

4 This approach can be also used in order to analyze the behavior of other actors in Germany or Finland. However, in the Greek case it is particularly acute, and this is why I focus on it here.

5 If one believes Mr Varoufakis, there is a different explanation: ‘Already, within hours, he had been pressured by major figures in the government, effectively to turn the no into a yes, to capitulate.', available at http://yanisvaroufakis.eu/2015/08/03/9698/ (accessed 6 August 2015).

6 This means that everybody knows the event, everybody knows that everybody knows the event, everybody knows that everybody knows that everybody knows the event … and so on. It is a very restrictive assumption, useful to calculate equilibrium outcomes.

7 According to the Hellenic Constitution Article 54, paragraph 1: ‘1. The electoral system and constituencies are specified by statute which shall be applicable as of the elections after the immediately following ones, unless an explicit provision, adopted by a majority of two thirds of the total number of Members of Parliament, provides for its immediate application as of the immediately following elections’, available at http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf (accessed 6 August 2015).

8 EΘNOΣ On Line 09:43 13/8 Δραγασάκης: Πιστεύαμε πως αν απειλούσαμε με έξοδο, η ΕΕ θα τρόμαζε-Κάναμε λάθος, available at http://www.ethnos.gr/article.asp?catid=22767&subid=2&pubid=64233300 (accessed 6 August 2015).

Additional information

Notes on contributors

George Tsebelis

Biographical note

George Tsebelis is Anatol Rapoport Collegiate Professor of political science at the University of Michigan.