When No means Yes: The Greek Bailout Agreement of 2015

Abstract

Within the framework of this paper the author argues that the Greek government attempted to strengthen their weak bargaining position vis-à-vis the Troika and the German government by threatening to defect if their demands were not met. In order to make their threats appear credible, they engaged in costly signalling, hoping to force the other side to capitulate. However, both the Troika and the German government remained unyielding, even in the face of the Greek referendum. Faced with domestic pressure to avoid Grexit, the Greek leadership ultimately gave in to the Troika’s demands.