Greece and eurozone officials are scrambling for options as Greece nears a default on its debt. How the events play out could have a significant impact on the euro currency as well as the sovereign debt of several other EU nations.

As rumors persist that Greece, already subject to a 110 billion euro (US$145 billion) bailout last year, may become insolvent, the credit rating agency Fitch Ratings downgraded Greece’s debt from BB+ to B+.

The action “the scale of the challenge facing Greece in implementing a radical fiscal and structural reform program necessary to secure solvency of the state,” Fitch said in its downgrade. Greek officials complained over the weekend that the downgrade doesn’t give it enough credit for its commitments in reaching its fiscal targets.

Although Greece has cut its debt and scaled back its public spending, its public debt is still in excess of 150 percent of its annual GDP, which investors view as unsustainable.

Back at the drawing a board, a few options are on the table. One is debt restructuring, replacing the current debt with lower interest payments, and another is extending the maturities on the debt, allowing Greece more time for payment.

Neither Greece nor members of the eurozone would want a default, which would trigger payments of credit default swaps (CDS) for holders of Greek debt and would hurt the euro currency.

Neither solution is palatable to parties involved.

One leading solution is called soft structuring, or debt reprofiling, which is an extension of interest payments without changing the interest rate or the principal of the loan. But under such a scenario, which must be agreed upon by the EU and private bondholders, Greece must implement additional austerity measures and possibly sell certain state assets to private companies to raise the funds. German Finance Minister Wolfgang Schaeuble in recent days spoke of this as one possibility.

Such a reprofiling would give debt holders, such as major European banks, the ability to keep their currency bond values on their books and avoid any economic impact to the financial system. While the reprofiling assumes that Greece is able to cut its public spending and sell enough assets to cover the liabilities in the future, others argue that such an extension of debt only postpones the pains of an unsustainably high debt load.

There are precedents. In 2003, Uruguay successfully extended maturities of its debt and eventually repaid debt holders.

But European finance ministers said late last week that Greece is still solvent, and any debt restructuring would occur only as a solution of last resort.

Some are still optimistic that the Greek government could cut enough expenses and ramp up asset sales to bridge its budget gap.

“If the [austerity] program is implemented one to one then Greece is solvent. And for this reason no restructuring should take place, but also taking into account all the negative impact it would have on Greece itself,” ECB Chief Economist Juergen Stark said in an interview with Greece’s Kathimerini newspaper on Sunday.

“This restructuring or reprofiling may be seen as a panacea, but in reality it creates more problems and does not help to resolve the existing ones.”

Officials were reported last week saying that if Greece was allowed to restructure its debt then other bailed out nations such as Portugal and Ireland may expect the same.

Greece, Eurozone Weighing Debt Options as Fitch Downgrades

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