This is not a Slog exclusive: Der Spiegel reported at the weekend that finance ministers from key concerned eurozone members had convened for secret talks in Luxembourg, but this was hotly denied to the point of hysteria, especially by German officials. Speaking on behalf of Angela Merkel, Government spokesman Steffen Seibert insisted yesterday that “Such a report has nothing to do with reality”. But The Slog is satisfied that the story is, in most of its major details, correct.

For a week now, the world has been distracted by the killing of a washed-up terrorist. But given the depth of Greek financial problems, it should come as no surprise that the Athenian Government is desperately seeking a way out from a currency it cannot devalue.

The Wall Street Journal reported last night that Europe’s debt crisis has returned full circle to the problem that started it over a year ago: how to save Greece from default as a result of its mad public spending policies under the previous Athens Government. In obvious expectation of a default, Standard & Poor yesterday cut Greece’s credit rating by two notches, leaving it at ‘B’. Quite why any lender would proffer funds to Greece even at sky-high yield levels is beyond me, but financial markets are rarely sane these days.

The Greek government has been steadily falling behind on its debt reduction targets, and eurocrat sources expect the struggling country to need at least €25 billion of extra financing for 2012. But such is the unwieldy – and, frankly, dilatory – attitude of Brussels functionaries, any accord on the controversial issues surrounding the latest Greek crisis will take months to reach. Athens has at best weeks to sort things out.

I understand the secret Luxembourg session was a desperate attempt to bypass normal EU procedures and fast-track some form of solution. In fact, the leak about the meeting hasn’t terrified anyone that much: most traders I spoke to have long regarded the exit as a strong probability.

In Germany, opposition to aiding Greece is rising in the Bundestag and the electorate. The Slog understands that privately, German ministers and bankers would like to find a default-avoiding solution to sell to eurozone member countries; but this is a toxic subject in German domestic politics. Fritz in der Strasse is as yet unwilling to grasp that Greek default would almost certainly be the catalyst for another international banking crisis….but this time on a far bigger scale than the one which doomed Lehman Brothers in 2008.

No wonder Seibert’s denial of the Spiegel story was so shrill.

The degree of exposure of EU banks to Greece, Ireland, Portugal and Spain is still a little understood topic among ordinary voters. But the insane policy of interlinked global banks means that, realistically, the chain-reaction set off by a major European bank over-exposed to sovereign debt is far more important than that sovereign State’s default per se. If Greece had been propped up by one Silesian bank, there would be no problem. But that is very far from being the case.

Meanwhile, the real situation in Ireland is giving eurobanks and bureaucrats fresh migraine attacks. Irish Minister for Energy Pat Rabbitte was far from frozen in the headlights when he told RTE at the weekend that he wants a rescheduling of the emergency loans extended to Ireland. “Quite frankly the interest rates on Ireland’s rescue loans must be reduced. In my own view the debt must also be rescheduled – but that’s another issue,” he said.

In the weekend Irish Times, distinguised Irish economist professor Morgan Kelly accused the Government of potentially making the “costliest mistake ever”, arguing that Ireland is heading for bankruptcy unless it pulls out of the EU-IMF deal. But what does ‘pull out’ mean – exit the eurozone? A question until recently restricted to the fringes of euro-politics is now being openly suggested by big wheels in even German political circles. Frank Schaeffler, a senior legislator in the liberal Free Democratic Party or FDP, the junior partner in Merkel’s ruling coalition, yesterday told the media that Greece (and other countries if necessary) should have the option to leave the euro zone if they wish to do so.”There has to be a possibility for an orderly exit from the euro zone,” Schaeffler told Dow Jones Newswires. “If Greece wants that, its euro-zone partners should positively support it.”Although all this represents a cacophonous noise to the lending market’s already burning ears, for most of the big credit players, it has the ring of inevitability. I am bound to say I agree with them.