Trading Opinions vs Arguing

Published: Nov 22 , 2012
Author: Yannis Dimarakis

The Hellenic government has been struggling over the last 6 months to finalize an austerity package demanded by its 3 creditors (i.e. the IMF, the ECB and the European Commission - know as the "troika"). The package's aim is to ensure that the deficit will be checked and that public spending will be reduced to sustainable levels. These measures are never popular as they usually entail steep salary and pension cuts, reductions in social benefits, decrease in the quality of health and education etc. None the less, this package, worth 11.5 bn € (a very heavy figure given the scale of the Hellenic economy), was asine qua nonfor the release by the creditors of the next installment of funds to the government in Athens. So the pressure was on to wrap this up as soon as possible.

The Hellenic government presented a number of measures to the troika, adding up to just over the targeted amount. The troika rejected a number of these measures (worth a total of approximately 3.5 bn €), arguing that these were not realistic and/or would not deliver the desired revenues (or savings). They did something smart. Instead of demanding new measures, they accepted the package as it was compiled, but demanded that an "incomplete execution clause" be inserted in the package. It stipulated that if the end result fell short of the targeted figure, then a new package (bearing new cuts) would be automatically applied.

The initial government response was to try to persuade the troika that the proposed package was realistic and viable. It soon became apparent that the creditors had no intention to change their opinion and insisted on the insertion of the above clause. In a change of tack, the government traded its acceptance of the clause for a counter "good execution clause", i.e. if its package reached and surpassed the targeted amount, the surplus would be used to support groups like pensioners and the unemployed who suffered most.

The above is a classic case where two parties engaged in a negotiation carry different opinions for a given subject. Principles, opinions and arguments are rarely open to debate and the chances of changing one's formed opinion are usually slim. The best strategy is to trade these opinions and create a transaction based on the different perceptions. In our above case, both the troika and the Hellenic government did the right thing. They created transactions based on the different assessment the involved parties carried on the end result of the proposed package, instead of arguing in support of their opinions.  

Good negotiating strategies and tactics avoid deadlocks and circular arguments that lead nowhere. They create value, opportunities and drive the process towards the desired direction. Realizing the right strategies and handling a negotiation in a structured manner can help anyone from countries finding themselves in dire straits to individuals going about their every day business. 

Yannis Dimarakis, Managing Partner - Scotwork Hellas


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