Greece: Are the multi-party negotiations on debt finished?
“For diplomacy to be effective, words must be credible.”
July 13th, 2015: Greece has a deal, or has it?
When you read the fine print, there are many conditions and many qualifications which the seven-page statement from the summit says are: “our minimum requirements to start negotiations with the Greek authorities”. So, the multi-party negotiations are not over and will continue probably for months.
So, how could the Greek government negotiate a deal? Before we consider that, let’s understand just how much debt we’re talking about. Greece owes about 246 billion Euro of bailout debt. I’m not sure about you, but I struggle to understand just what 1 billion is. Technically it’s 1,000 million, but that’s no clearer to me. So let’s try and put it in context, Greece has a population of about 11 million, let’s say about 10 million to keep the arithmetic easier. That means 246 billion Euro debt is 24,600 Euro for each person. In Greece, about half the population works, so the debt is about $49,200 per working person. Currently, 1 Euro is A$1.5 so that’s about A$75,000 of debt for each working person in Greece.
How could Greece find a deal? Well first we should note this is a multi-party negotiation which is far more difficult than a two-party deal. Instead of trying to find a deal that meets the differing interests of two parties Greece are trying to negotiate a deal with 17 other parties: members of the Eurozone.
How do they start? First, look at who owns the debt.
So, first we see that three countries own most of the debt: Germany, France and Italy. That means we need to find a deal that satisfies those three countries to stand any chance of success. The newspapers have reported Germany and France have been very active and that’s because they have the most to lose financially. Interestingly, Italy have been very quiet but that’s because they have huge debt problems of their own. So, firstly we need a multi-party negotiation to find a deal that satisfies some of the interests of Germany and France. Of course, if it is to be a deal then it needs to satisfy some of the interests of Greece too.
In practice, we would start by getting the parties from Germany, France and Greece to put aside their positions and spend time understanding what the interests of each other were. Then, try and rank these interests because in such a complex multi-party negotiation a deal will need trade-offs or very creative packaging. A creative negotiator always starts with interests. In complex multi-party negotiations, always start by understanding the underlying interests of the most important parties.
Germany
Find options that:
Will repay the debt
Do not encourage bad behaviour by other governments with high debt
The German parliament will accept
French negotiators will accept
Other members of the Eurozone will accept
Keep Greece in the Eurozone
France
Find options that:
Enable Greece to meet their commitments
Don’t give Greece a better deal than France
Will pass the French parliament
Keep Greece in the Eurozone
“For Greece, a future not limited solely to repayments.”
Manuel Vallas, French Prime Minister.
Greece
Find options that:
Will repay the debt
Will help the Greek economy grow
Will create jobs
The Greek parliament will accept
Get other countries in Europe with high debt to support Greece (e.g. France & Italy)
Keep Greece in the Eurozone
The next step in a multi-party negotiation would be to create some options that meet some of the interests of the three parties, since the negotiations are likely to continue for weeks if not months. We will discuss creating options in another blog. To gain insights into complex negotiations come to the negotiation workshop at UTS where Andrew Brodsky from Harvard along with other speakers will be sharing their knowledge on Monday 27th July, 2015.