Merkel’s ultimatum and Papandreou’s game of chicken

A. Merkel played hardball with the banks’ negotiator and head of IIF Charles Dallara last week in trying to make the banks go along with her plan for a 50% haircut of Greek debt. Merkel played the game of ultimatum putting the offer on the table and making sure Dallara understood she means business when she said “take it or leave it”: If the banks did not blink then she would even consider a Greek default.

Yesterday Papandreou played game of chicken against Merkel and Co having as his minimum goal to be allowed to leave the government in a dignified way: while there was a long shot of Merkel and Co actually blinking the real target was that Greek opposition would prevent him from going to a referendum by causing premature elections. Papandreou appears to have reached his minimum goal now: It is questionable whether his government will survive this Thursday. The exit is coming but it appears less dignified than he hoped.

What Merkel’s ultimatum and Papandreou’s game of chicken share in common is that they were both willing to bet the Greek nation’s fate on the green table. Where they differ (besides Papandreou losing his cool and changing the very content of the referendum) is that you are more believable when you play using a nation other than yours…


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