Europe, EU Central Bank plays Game Theory with Germany and Greece

Posted: February 6, 2015 in Uncategorized

The other day the BCE pulled away a refinancing facility for the Greek banks.

The move has been subtle, but practically raised the staked for both Greece and Germany.

Greece now does not have any more mean to finance itself after 28 February (well probably could last till 10 March). At that point it would really have no choice but print its own money and print New Dracma and leave the European Union, for real.

It raised also the stake for Germany. The stake of Germany is more political than economical. It raises the possibility that other countries leave the European Union (which is the free market  trade market that let Germany prosper).

Why they did this? Just to push the two parties to more conciliatory modes.

Yesterday meeting between Greek and Germany was a clear Nein from the Germans…but the real push is towards a three month agreed extension to come to a solution.

It will just buy some time.

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