Are the Greeks Sound Negotiators?

The country owes 300 billion euros, and its leader is talking about Nazi war crimes. That might not be the worst tactic.

Tsipras Hollande
French President Francois Hollande (right) and Greek Prime Minister Alexis Tsipras after a meeting in Paris on Feb. 4, 2015.

Photo by Philippe Wojazer/Reuters

As we reach a showdown in the Greek debt crisis, it’s easy to marvel at the negotiation strategy of the country’s top officials. Greece is more than 300 billion euros in debt. Its newly elected, far-left government has a mandate to raise the minimum wage and to hire more public workers, but there’s simply no money to do that. The only possible cash on the horizon would need to come through the generosity of the “troika” of the European Central Bank, the European Union, and the International Monetary Fund, which Greece is asking for a measure of relief from its debt obligations. By all rights, Greece should be groveling.

Yet as they’ve met with eurozone leaders this month, Greek officials have behaved as though they’ve got the upper hand. While the troika has demanded Greece adhere to austerity measures that the country agreed to in return for a bailout five years ago, Greek leaders have come out guns blazing, with declarations Wednesday that it wants to ditch 30 percent of the obligations they’d previously submitted to. More boldly, new Greek Prime Minister Alexis Tsipras has even suggested that now would be a good time for Germany (in many ways the real holder of the purse strings here) to atone for Nazi war crimes by paying Greece reparations. Eurozone finance ministers are gathering this week, and again on Monday, with expectations that a deal might be brokered during these meetings.

What are we to make of the Greeks’ posturing? Are they employing sound bargaining techniques? Some broad negotiation concepts apply, whether you’re haggling over a used Suzuki Esteem (in which case, may I humbly suggest you’d benefit from listening to Slate’s Negotiation Academy, a podcast I co-hosted) or you’re battling over hundreds of billions of Euros in sovereign debt—in which case, yikes, stop reading Slate and get back to the conference table.


This is the “best alternative to a negotiated agreement.” Basically, it means: What happens if you walk away from that conference table without making any deal at all?

For Greece, the BATNA appears to be a total economic meltdown. If there’s no deal, there’s no more money coming from the troika. And without any further loans, Greece will run out of cash. It will be unable to meet its internal pension obligations. It will suffer bank runs. It might have to exit the eurozone and return to the drachma, which would quickly devalue, leading to a collapse of savings. There would be rampant chaos. As I understand it, the technical term for the situation Greece faces is “a raging dumpster fire.”

Now, Greece might feel that the troika will blink and that if there’s no grand bargain Greece will be offered a few billion short-term, emergency euros as a “bridge program” to keep the lights on while the broader negotiation sessions are extended. Greece might view this as its BATNA. It’s also possible, I guess, that Greece is imagining that some other white knight will rush in—a different benefactor, or some brilliant internal policy maneuver, that will save the day. The troika’s likely response to this idea: Good luck with that.

For the troika, walking away from the table with no deal will lead to a near-certain Greek default. Which means never recouping those hundreds of billions of owed euros. The troika can absorb those losses, even if it wouldn’t be thrilled about them. But achieving no deal could also lead to the dreaded “Grexit”—Greece exiting the euro. This would spur a crisis of confidence, as the euro suffers its first defection. Speculators might bet that the same narrative will play out next in Spain, with a domino effect in the offing.

Note that it’s possible to attack your opponent’s BATNA. For instance, according to the BBC, Greece’s finance minister recently stated that “the euro was as ‘fragile’ as a house of cards. ‘If you take out the Greek card the others will collapse,’ he said.” He’s arguing that the troika, too, badly needs to reach a deal.


This is the “zone of possible agreement.” (Negotiators love acronyms. And jargon.) It means: What is the range of possible deals that would satisfy both sides? Framed another way: How far can each side push the other before someone throws his or her hands up, pushes the chair away from the table, and walks off in frustration?

For Greece, it’s unclear where the walkaway point is. Things at home are already really bad! People are without electricity! Greece’s debt adviser, a finance guy at Lazard, has said that the country “knows a humanitarian crisis like Europe has not known since World War II.” When you’re already miserable, it’s easier to walk away from a deal that might make you only marginally less miserable. Then again, “really bad” is still better from “raging dumpster fire.”

The newly elected Greek leaders are in a tricky spot. They need to demonstrate to their frustrated constituency that they’re being tough—mainly by pushing back on those hated austerity policies, which Greeks blame for their current economic hardships. If the troika relaxed a few of the more minor austerity requirements, would that be enough for Greek honchos to save face? Or will Greek leaders fear the reaction at home unless they persuade the troika to make real concessions on this issue, and thus bolt from the table if those concessions are not forthcoming?

Another sticking point for Greece is the troika itself—the Greek public seems to direct a lot of its anger at these faceless institutions, and many Greeks want to deal with a different set of masters. As the Wall Street Journal put it: “Many Greeks feel the troika has humiliated their country. Doing away with the group is one of the new government’s key demands.” Is it possible to tell the people you owe a load of money to that you want to deal with someone else? Is there a way to deal with a less-despised middleman?

There seems to be some wiggle room on this troika disintermediation, but just a smidge. Again from WSJ: “German officials insist such changes can only be cosmetic tweaks—the troika could be renamed and some of its meetings held outside of Greece—designed to make a new program easier for Athens to sell to Greek voters and lawmakers.”

For the troika, one walkaway point might hinge on whether lenders are amenable to reducing the actual principal Greece owes. Germany, for its part, seems totally unwilling to do so—Chancellor Angela Merkel says a write-down (aka a “haircut”) is out of the question, though it might be possible to extend Greece’s payback schedule over a longer period of time. Merkel might also walk away if Greece insists on ignoring certain austerity obligations (it says it wants to scrap 30 percent of them, to be replaced with a 10-point plan of Greece’s own devising). Germany doesn’t want to shovel money Greece’s way without assurances that Greece is spending its cash judiciously.

Time Crunch

Time is a classic determinant of leverage in negotiations. If one side can wait things out and the other can’t, guess who starts sweating? In this case, the real-time constraint is that Greece will run out of money within, by some accounts, a few weeks. When that happens, fireworks ensue, so reaching a deal before the cash disappears makes a big difference. Who is feeling that time crunch more acutely? Probably Greece. Without money, the country’s economy will quickly plummet into turmoil. The troika will feel consequences if this happens, but the pain won’t be nearly as sharp or as immediate. To be sure, the troika has imposed some phony deadlines, urging Greece to reach a deal before various high-level meetings conclude. But the clock that matters is the one that’s counting down to Greece’s cash crisis.


Anchoring is when you make an extremely bold first offer with the intent of swinging the negotiation in your favor—understanding that you will eventually make some concessions. It works best when neither side knows the exact value of the thing you’re negotiating over. For instance: If I offer to sell you a mysterious piece of pottery for $1,800, this will frame our negotiation much differently than if I say I’ll let you have it for $20. In the absence of either one of us knowing which figure is closer to the fair market price, the initial number that gets thrown out can psychologically anchor the negotiation around a certain range. (For more on this, listen to behavioral economist Dan Ariely explain the concept on Slate’s Negotiation Academy.)

In this case, there’s not a ton of hidden information. We know the amounts of the existing debts, their payback schedules, and their interest rates. We know the austerity measures requested by the troika. What we don’t know is how far each side is willing to bend. But Greece has still come out with some extreme initial offers. It wants to influence the range in which compromises take place. Its anchoring point was “forget about a huge amount of debt and also apologize for being Nazi jerks.” It hoped the conversation will be psychologically swayed by that severe opening bid. And it is already softening its tone. From Bloomberg:

“The Greek side entered the negotiations very powerfully and very soon realized that things are worse than they expected, as they faced a concrete wall,” said Aristides Hatzis, an associate professor of law and economics at the University of Athens. “A U-turn began very quickly. [Finance Minister Yanis] Varoufakis slowly started pouring more water in his wine.”

Positional Bargaining vs. Underlying Interests

Positional bargaining is the kind of negotiation we usually think of: I say I won’t offer more than $150 for your Suzuki Esteem, you say you won’t take less than $500. Then, presumably, we meet somewhere in the middle.

But negotiation experts like to move past these simple strategies and instead analyze the underlying interests of the two sides. Maybe my underlying interest is that I need a way for my teenage daughter to get to her job at the ice cream shop a few miles from home, but I truly can’t afford more than $150. Your underlying interest is getting enough money to buy a really nice dinner for your spouse’s birthday, and $150 would accomplish that, but you truly can’t justify parting with the Suzuki for so little. But wait! You have a bicycle you don’t use! It’s worth roughly $150! It would work for my daughter’s commute! We make a deal, even though it wasn’t the one that either of us had in mind when the negotiation started.

We can argue all day over precise interest rates, and payback schedules, and austerity measures, and so forth. What really matters here, though, are the underlying interests. For the troika, the underlying interests might be a functional monetary union and the avoidance of a Grexit—even if that means compromising on austerity demands. For Germany, the underlying interest might be to teach Greece (and any other countries tempted to play hardball) a lesson—even if that means breaking up the euro. For Greece, the underlying interests might be to get its pride back and to defy the troika—even if that means a certain level of economic deterioration.

This is where the players need to look deep inside. There might be a compromise to reach. But it won’t be about minutiae. It will be about underlying interests.