You are here:   Columns >  Cosmos > Acting the goat with the Greeks
Acting the goat with the Greeks
December 2017 / January 2018

Getting the goat: In the Monty Hall paradox, opening one of the doors changes the circumstances (Darklich14 CC BY 3.0)

In his recent book Adults in the Room, (Bodley Head, £20) Greece’s former finance minister Yanis Varoufakis inveighs against EU apparatchiks, such as Jeroen Dijsselbloem, the unyielding chief of the eurogroup of euro area finance ministers. Their attitudes excluded the possibility of a negotiated, mutually beneficial outcome to the Greek debt crisis, already hostage to two bailouts that got French and German banks off the hook for unwise loans to Greece. Varoufakis writes, “Negotiating with them, trying to reason with them, was like negotiating a peace treaty with generals hell-bent on continuing a war safe in the knowledge that they, their sons and daughters are out of harm’s way . . . Why did Greece’s creditors behave as if they did not want their money back?”

Part of the answer is that German and French banks were now far better protected from a Greek default, so helping the Greek government collect tax, and correct a banking system that rewarded the oligarchy, were of relatively low importance. Varoufakis illustrates the banking problem with a story about Aris and Zorba, phrased initially in terms of two poor Irishmen who persuade a local publican to lend them a barrel of whiskey. They want to sell its contents by the cup at a fête in the neighbouring town, but rolling it along the road they pause for a break under an oak tree. One offers the other a shilling if he can take a cupful. His partner now has a shilling to spend, and does likewise. So it goes on — and on. Varoufakis rephrases this in a Greek context where Aris’s bank needs money, which Zorba lends to Aris’s offshore companies. In turn, Aris’s bank lends a similar amount to Zorba’s offshore outfits, and their families then use the offshore money “to buy new shares in their own banks, thus fulfilling the regulator’s requirement that new capital be raised and thereby qualifying for the real money that the poor taxpayer was borrowing from the troika”.

Rather than suffer the hangover the whisky-quaffers endured, along with their debt to the publican, Aris and Zorba end up owing nothing because the debts are written off soon after being granted — yet more non-performing loans among what is now €100 billion, or 45 per cent of overall lending, according to the FT.

Unfortunately many of the big players in the EU, such as Dijsselbloem (who was forced to correct a proud claim by the European Investment Bank that he had an MA in business economics from University College Cork) seem to have been largely innumerate, rather like the clever classicist who told me Brexit had only a 5 per cent chance of success. Had he tested the probability of “success” in numerous parallel universes? Of course not.

Numbers can be invaluable, but only when obtained in a rational manner and not invented to back up an emotional opinion. Even such paragons of exactitude as mathematicians have to be careful here, as the following problem illustrates.

View Full Article

Post your comment

This question is for testing whether you are a human visitor and to prevent automated spam submissions.