July 14, 2011
Top euro-zone politicians, engaged for months in a string of meetings that have failed to bring agreement on how to provide more aid to Greece, are trying furiously to stamp out the flames of contagion licking at Italy and Spain.
Fears have also ricocheted elsewhere: Ireland's prime minister said Wednesday in his parliament that it was time for European Union leaders to "grasp the nettle" of the debt crisis, adding that Moody's Investor Service's move late Tuesday downgrading Ireland's debt to junk status was caused by the bloc's failure to respond adequately.
European leaders are planning an emergency summit in coming days on Greece's intractable debt problem, according to people familiar with the matter. The country's soaring debt pile shows no signs of shrinking, and the euro zone's solution so far, which has been to keep lending Greece money that private financial markets won't provide, hasn't changed that.
What EU leaders once ruled out—a default by a euro-zone nation—has firmly entered the sphere of the possible.
Some form of action to cut Greece's debt load by handing losses to its creditors may be the only option left to prevent that debt from spiraling out of control. "We are more and more moving toward a recognition that some form of restructuring is inevitable," says Fabian Zuleeg, chief economist of the European Policy Centre, a Brussels think tank. "The volume of debt is not manageable."
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