Friday, February 13, 2015

Varoufakis faces challenge of turning game theory into triumph

by Ferdinando Giugliano

Financial Times

February 13, 2015

As a professor of game theory, Yanis Varoufakis, Greece’s new finance minister, has spent many hours showing his students how the study of strategic interactions can help explain the behaviour of consumers and businesses.

But as he seeks to secure a good deal for Athens during fraught talks with Greece’s eurozone partners, Mr Varoufakis faces the challenge of translating these theoretical insights into a winning negotiating strategy.

The ultimate prize is a reduction of Greece’s towering debt mountain, which stands at more than 175 per cent of gross domestic product. There is also a risk, however: if the negotiations break down, Athens could lose the eurozone safety net around its shaky public finances and banks, potentially stumbling into a chaotic exit from the single currency.

But what kind of game are Mr Varoufakis and his eurozone colleagues playing?


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