July 11, 2011
European finance officials struggled to find ways to resolve Greece's debt crisis on Monday as sharply rising bond yields in Italy, the euro zone's third largest economy, added to the sense of urgency.
One senior European Union official said the situation had become almost entirely a political rather than an economic crisis, with parties taking firm, irreconcilable positions.
"We've painted ourselves into a corner. At this point, either someone -- Germany, the ECB (European Central Bank) -- has to fundamentally shift position, or everything blows up," the official, who declined to be named, told Reuters.
The euro sank 1.6 percent against the U.S. dollar to its lowest level in six weeks and markets around the world moved in response to fears that Greece might eventually default. U.S. Treasury bonds rose sharply as investors sought safer assets.
EU sources said the 17 euro zone finance ministers were discussing the possibility of organizing a buy-back of Greek sovereign debt, or of asking private investors to swap their bonds for debt with longer maturities.
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