Euro 2012: How the underdogs can prevent a Grexit in Gdansk against the Germans
EVERYONE is expecting a Grexit. Professor Stefan Szymanski has a six-point plan to save the day for Greece against Germany in the Euro 2012 quarter finals.
1. Financial fair play
On paper the Germans are worth more than the Greeks - the German squad is valued at €630 million and the Greek a mere €115 million. The regulatory authorities have for some time been seeking to dampen structural imbalances in the system. Under the LTRO (Long Term Refinancing Operation) the ECB (European Central Bank) could grant Greece an overnight loan of Ronaldo, Xavi and Buffon. While the PIIGS (Portugal Ireland Italy Greece Spain - otherwise known as the Group of Debt) would be the natural lenders in this situation, Ireland need not be called upon to contribute given their recent catastrophic losses.
2. Fiscal discipline
The Germans will be thrifty at the back and highly competitive going forward, although of late they have taken to pointing out to anyone who will listen that even their resources are not unlimited. The Greeks could try to ward off German attacks with their traditional 4-4-2 defence, but in the current situation two banks of four may be more of a liability than an asset. They may not even have two banks. Moreover, there are concerns that if the Greeks do fall behind they will be incapable of structural reform. Nonetheless, the Greeks do work longer hours on average than the Germans, so playing for extra time should favour them.
3. Labour market reform
There have been rumblings in the Greek Euro 2012 camp for some time about the management, and several changes in recent months. Most outsiders would prefer a technocrat who would be willing to make some difficult decisions about the older players in the squad. In recent years, Greece has had some of the most persistent and aggressive strikers in the world. Traditionally they have been strong on the left-wing but recently the right-wing has been imposing itself on anyone that gets in its way. As long as they do not fall out with each other they could terrorise the Germans. On their day they could set the stadium on fire.
4. Lender of last resort
In a crisis Greece can always draw on its reserves. The reserve-asset-ratio does not look good, but it has been well massaged and in the event that there has not been a meltdown, they can at least waste a little more time. Eurozone governments have agreed that penalties should settle the matter when time eventually runs out. Germany has a good record, but even they have not ratified recently.
5. Target imbalances
If the fundamentals do not look good, minimizing the loss function for an nxk matrix of rational agents in the context of a Markov switching regime using the Jordan-Chevalley decomposition may induce multiple Nash equilibria which are unbounded above (eg Maradona (1986) or Iniesta et al (2010).
If, despite all this, Greece finds itself suffering from a structural deficit at the end of the game, then Syriza has developed a plan to repudiate the result and start all over again.
Stefan Szymanski is Stephen J. Galetti professor of sport management at the University of Michigan. He has written five books, including the bestseller Soccernomics (with Simon Kuper) published by HarperCollins.