Paper #2: Analyze problems of cooperation using concept of distribution, enforcement, and

information.
Greece has played a critical role in the current European Economic Crisis. Greece has
had over the budget expenses and overly-increased spending in public goods even years before
adopting the Euro [Elstat, BBC, 2012]. The European Union, along with the International
Monetary Fund (IMF), agrees that the survival of Greeces economy is critical to the economic
stability of the European Union as a whole. The austerity measures take to alleviate loan
agreements with the IMF in Greece lead to information problems as all actors are uncertain of
the implications those measures would bring to the Greek people and the rest of Europe. This is
tied to principle six which states how leaders are influenced by both domestic and international
worlds. Principle three states how people are the foundation of power, and with this power, the
people of Greece do not believe austerity measures will aid in Greeces recovery and loan
payments, but rather believe that other measures are needed to promote growth in the economy,
thus resulting in distribution problems in which the actors involved disagree in which is the best
solution for the unstable economy of Greece and Europe. Agreements will be self-enforced as
many actors and parties economies are at stake. If Greece does not pay back the loans to its
creditors, there is a chance of creating a domino effect in which creditors will become hesitant to
lend to other highly-indebted nations in Europe thus leading the region into a downward cycle
[Elstat, BBC, 2012]. The Greek government must analyze the proposed solutions and try to
foresee clear consequences of austerity, establish agreements not only with the IMF and
European Union members but also with its people, and since repayment of loans is crucial for all
actors, enforcement will naturally happen, but creditors must establish a system to ensure
progress; this will make an agreement with creditors more likely to happen.
The austerity measures taken into consideration by Greece lead to information problems
as the government is not entirely sure of the consequences on the people of Greece, and
ultimately the rest of Europe. Austerity measures have been insisted by the European Union
members and the IMF [Elstat, BBC, 2012]. The impact of austerity on output may be more
severe than currently anticipated, Mr Monokroussos, head of market research at Eurobank,
stated in regards to austerity [Hope, Spiegel, Financial Times, 2012]. The IMF is not sure of
consequences either. The Fund has been continually unable to predict the outcome of
austerity measures, and constantly disoriented by the capacity for developed economies to take a
double dip [Mason, BBC, 2012]. Austerity is implemented in Greece as increasing burdens
during a short period of time will improve the economy in the long run, which is due to the
shadow of the future that shows that the state cares about the future of its people. This also
implies that Greece is willing to cooperate with the rest of the European Union and the IMF in
order to keep the economic balance in the region; due to the 6th principle, the Greek state must
not only focus on its domestic situation but also on the long-term impacts on the economy of the
rest of the region and rest of the world.

The people of Greece, along with many financial experts, disagree that austerity measures
will aid Greeces recovery. According to the 3rd principle of world politics, people are the
foundation of national power. Austerity measures can potentially further decline output and
GDP. In a speech to Athens bankers Mr. Dallara said Greece urgently needs more emphasis on
growth and less emphasis on austerity [Hope, Spiegel, Financial Times, 2012]. The Greek
people fed up with unemployment and falling living standards might make it impossible to
continue implementing austerity [Elstat, BBC, 2012]. The Eurozone finance ministers are trying
to obtain an agreement with the IMF that would reduce debt over the next decade through a
combination of cutting interest rates on existing bilateral loans, extending debt maturities,
launching a debt buyback scheme, and the European Central Bank forgoing any profits on its
holdings of Greek debt [CNN, 2012]. In November 14, 2012, a series of protests sparked
through Europe as union workers want the governments to stop cutting benefits and create more
jobs. The solutions sought out by the European Union, and those by Athens itself, are both
difficult for the population in short term, but are meant to improve the conditions of the economy
of Greece within a few years.
It has been difficult to come to agreements with the IMF because Greece needs a plan to
pay back its loans, not only to the IMF, but the rest of its creditors. If Greece does not repay its
creditors, then there is a risk that creditors and investors will become increasingly nervous with
other weak economies repaying their debts. To combat the risk, European leaders have agreed a
700 billion euro firewall to protect the rest of Europe from a Greek default [Elstat, BBC, 2012].
In this case, it is difficult for any side to defect, as any solution will affect all of the parties
involved. There is a small to no incentive to cheat, as many actors are willing to aid Greece and
help alleviate the economic burdens of its state. Some of its creditors have even gone as far as
forgiving loans and others in reducing interests of previous agreements, as long as Greece starts
implementing a set of institutional and market changes [Costas, Vayanos, Vettas, Bloomberg,
2012]. If Greece defects, which in this case would mean it wouldnt pay its creditors and leave
the European Union, it would create the possibility of a greater conflict. If the European Union
members and the IMF do not help Greeces economy, it would lead to a regional economic
disaster. Greeces creditors must create a system to keep check on progress done with the
provided funds and agreements, ensuring economic growth for the region.
Greece must push forward to emphasizing growth and building a well-functioning public
administration. There are many uncertainties to the many proposed solutions, but the information
problem can be solved through honesty and clear agreements. The distribution problem caused
by the many solutions proposed can be solved through clear bargaining and creating a
combination of austerity and loan agreements with the IMF will bring economic stability to
Greece within the next decade. There must be an emphasis on growth and job creation, as an
unstable society can bring uproar and collapse the current system as it is. Enforcement with
agreements become a given when so much is at stake. The European Union, the IMF, and

Greece, must come to an agreement to provide sustainability to the economy of the region along
with stability.
Word Count: 1100
Bibliography:
Elstat. "Eurozone Crisis Explained." BBC News. BBC, 27 Nov. 2012. Web. 25 Nov. 2012.
<http://www.bbc.co.uk/news/business-13798000>.
Mason, Paul. "IMF Calls Time on Austerity - but Can Greece Survive?" BBC News. BBC, 10
Nov. 2012. Web. 28 Nov. 2012. <http://www.bbc.co.uk/news/world-19908649>.
Hope, Kerin, and Peter Spiegel. "Greeces Recession Deepens amid Austerity." Financial Times.
N.p., n.d. Web. 23 Nov. 2012. <http://www.ft.com/intl/cms/s/e92fa408-2e73-11e2-8bb300144feabdc0,Authorised=false.html?_i_location=http://www.ft.com/cms/s/0/e92fa408-2e7311e2-8bb3-00144feabdc0.html>.
"Eurozone Seeks Deal with IMF on Greece." CNN. N.p., 21 Nov. 2012. Web. 23 Nov. 2012.
<http://edition.cnn.com/2012/11/20/business/greece-eurozone-imf-deal/index.html>.
Meghir, Costas, Dimitri Vayanos, and Nikos Vettas. "Greece Needs Growth, Not Austerity."
Bloomberg. N.p., 20 Nov. 2012. Web. 28 Nov. 2012. <http://www.bloomberg.com/news/201211-20/greece-needs-growth-not-austerity.html>.