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There is growing consensus that the bailout terms offered last year to Greece by the European Union (EU) and the International Monetary Fund (IMF) may need to be revised. Greece is struggling to address its budget deficit target with weak tax revenues and a shrinking economy. The bailout package has failed to convince investors that Greece will be able to pay all of its financial obligations without additional outside support. A select group of top euro zone finance officials met in Luxembourg on Friday night to discuss the situation in Greece. Although EU officials still insist publically that restructuring Greek sovereign debt is not being considered, some officials concede privately that some form of restructuring such as an extension of maturities dates referred to as a “reprofiling” of Greek bonds, may be inevitable. The euro tumbled after reports of the meeting surfaced when Germany’s Spiegel Online erroneously reported that the meeting was called because Greece was thinking of leaving the euro zone.

QUESTIONS FOR DISCUSSION:

  1. If the EU and the IMF do agree to a restructuring of the bailout terms for Greece, should more favorable terms also be offered to Ireland and Portugal?
  2. Not all euro-zone nations were invited to this weekend’s informal talks for EU finance ministers to discuss the situation in Greece. Was it wise to not include all the euro-zone members in the discussions if it allowed for consensus on an action plan?
  3. What would be the consequences if the rumor that Greece was considering quitting the euro zone turned out to be true? Is it better for the strong euro-zone countries such as Germany to continue bailout Greece or allow Greece to leave the euro zone?
  4. The EU seems to have come full circle and is back in the same situation it was last year at this time deciding what to do about Greece. What should be the EU’s next action steps?

SOURCE: Torchia, A., & Crimmins, C. (2011, May 8). Europe pressured to revise Irish and Greek bailouts. Reuters.com. (Retrievable online at: http://www.reuters.com/article/2011/05/08/us-eurozone-crisis-idUSTRE7471WV20110508)

RELATED ARTICLE: By Walker, M., Paris, C., & Forelle, C. (2011, May 9). Euro nations divided over Greek debt. Wall Street Journal, p. A12.
(Retrievable online at: http://online.wsj.com/article/SB10001424052748704681904576310903867359240.html)

Related video clip: Euro Chiefs Rule out ‘Stupid’ Idea of Greek Exit. (Retrievable online at: http://www.euronews.net/2011/05/07/euro-chiefs-rule-out-stupid-idea-of-greek-exit/)

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