Crisis Negotiation Skills: Learning from Others’ Mistakes

Crisis negotiation skills can help us get what we need without antagonizing the other party. The 2015 negotiations surrounding Greece’s financial crisis highlight mistakes to avoid.

By — on / International Negotiation

Crisis negotiation skills

When facing crisis negotiations, we often bargain from a position of weakness, hands outstretched in the hope that the other party will help us stay afloat. A special set of crisis negotiation skills is needed as we strive to advocate for our needs without pushing our counterparts too far. 

Examples of negotiation in international relations often provide useful examples of effective crisis negotiation. During its 2015 negotiations with other eurozone nations for the funds it needed to survive its deepening financial crisis, the government of Greece had difficulty striking an effective balance between assertiveness and humility.

Austere Negotiations

In the aftermath of the 2008 global financial crisis, Greece revealed it had been understating its deficit figures for years, news that prevented it from borrowing in the global financial markets. After skirting bankruptcy in 2010, Greece received two international bailouts totaling approximately $318 billion from the International Monetary Fund and the European Union. With the funds going primarily toward repayment of Greece’s huge debt, the nation’s economy continued to shrink, and unemployment skyrocketed.

In 2015, having risen to power in opposition to the austerity of European-led recovery plans, Greece’s new prime minister, Alexis Tsipras, engaged Greece’s European creditors—the 18 other nations besides Greece that use the euro—in a new round of bailout negotiations. With “a style of bluster and attack that is just not how things are done among European leaders,” according to Neil Irwin of the New York Times, Tsipras and his negotiating team demanded a reduction in its debt—a so-called haircut.

When European negotiators refused, Tsipras surprised them by announcing he would allow Greek citizens to vote on the austerity deal on the table. In public appearances, the prime minister urged his countrymen to vote down the European proposal, saying a no vote would help Greece gain leverage in the negotiations and get a better deal—even as European policymakers warned that a no vote would imperil Greece’s chances for any deal at all, according to the Wall Street Journal.

As Tsipras had hoped, Greeks rejected the European deal. But the outcome had repercussions that the prime minister seemed not to have anticipated. Conveying defiance and instability, the referendum result put the nation’s financial system on the brink of collapse. Greece’s banks and stock market closed, and the negative press took a toll on the tourism industry.

Returning for a Worse Deal

As talk of Greece having to leave the eurozone grew, Tsipras headed back to Brussels, hat in hand. On July 13, following contentious round-the-clock crisis negotiations, he and his team agreed to an austerity deal with European creditors that was worse than the one rejected by Greek voters and that the Times characterized as “an almost total capitulation.”

In exchange for up to $98 billion, the new bailout imposed higher taxes, cuts to government pensions, and a sell-off of $55 billion in state assets to recapitalize Greek banks and enable debt payments, according to the Times. The eurozone nations also agreed to consider easing repayment terms on Greece’s existing $300 billion in debt and to provide $30 billion for a short-term stimulus program to try to jolt Greece’s economy toward recovery. The Greek parliament quickly approved the deal.

Four Crisis Negotiation Skills

Negotiations between Greece and its creditors, a standout among notable international negotiation examples, suggest the following crisis negotiation skills:

  • Think several steps ahead. Tsipras appeared to view his decision to hold a referendum as a means of firming up his approval at home. Yet he failed to adequately think through what might happen if voters rejected the bailout deal: that Greece’s economy could tumble further, putting it in an even weaker negotiating position with Germany and its allies.
  • Match your pace to outside events. A keen sense of pacing is one of the most important crisis negotiation skills. Sometimes you may want to try to encourage a slower, more methodical pace; at other times, you will need to keep up with rapidly changing events. The Greek government ignored such pacing issues, conducting leisurely bailout negotiations with its creditors and pausing for a referendum even with its economy in free fall.
  • Rationally assess your own power. A hard-line approach to negotiation that includes making rigid demands and attacking the other party’s views is rarely an effective crisis negotiation strategy. It’s a downright disastrous choice when you have no strong BATNA, or best alternative to a negotiated agreement. When asking for favors, make it easy for the other side to say yes, both with your actions and your demeanor.
  • Make a contingency plan. Tsipras and his team reportedly thought little about what would happen if bailout talks failed. Germany and other European nations, by contrast, thoroughly considered the possibility of Greece leaving the eurozone, according to the Times. Through such contingency planning, Europe became comfortable with its BATNA, while Greece was left staring into the abyss.

What other crisis negotiation skills do you have in your toolbox?

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