As I struggled along with most other observers to work out just WTF had gone wrong in Athens last Saturday morning, The Slog’s only reliable source finally surfaced to say a thing or two. In the time since then, I have been trying to piece together what happened…with the help of the Bankfurt mole, and sources in Washington and Paris.

“This thing was snatched from our grasp yesterday [Friday] afternoon,” the Athens negotiator told me, “and removed to a much higher sphere. It could be that the EU finally grew some balls.”

The detail of what seems to have occurred must remain as conjecture until somebody writes a book about this saga. What’s clear is that last Friday around lunchtime, a deal had been reached for some low-start new bond issues, followed by later-maturing ones at a higher rate. In return for a 70% haircut by the lenders, the rate average of all the bonds to be issued was 4.25%. The legal beagles went away to write it up amid cautious handshakes. At which point some Troika heavies made an announcement: nope, the average had to be no more than 3%.

That was a big difference. But this wasn’t the Greeks making the demand: it was the IMF, the ECB, Berlin, a bit of Paris…and just a hint of Wolfgang Schauble – the all-time believer in default within the EU.

Somebody somewhere had decided that the time was right for a power play. Major offloaders of March-maturing bonds had been French and German banks in recent months….with targeted help from Draghi’s ECB. Whether this was a trap deliberately set by Draghi I couldn’t say, but either way its effect has been to leave Paris and Berlin considerably less exposed to Greek debt than previously….and the Hedgies holding the baby. By Saturday lunchtime, it had dawned on the key IIF movers that a point was being made from the top: “OK punks – let’s see what you got”.

Significantly, Merkel, Lagarde, van Rompuy and Barroso held a pow-wow in Berlin yesterday afternoon. There is a growing feeling that the EU ‘management’ now feels it is ready to face a default inside the eurozone. The point – and for once, it’s a sensible idea – would be to say to a frightened world, “Look – we rode a default, and won”.

If correct, this vindicates all those who have said from the start that Merkozy was simply playing for time with both the Greeks and their creditors: that once the banks had been sandbagged, they would turn round to the bondholders and say, “OK – do your worst”. It is an enormous gamble. If pushed too hard by their bondholders, Iberia and Italy might give up and default too; and that would make the euro too toxic to survive. But the opinion being followed is, “If we win in Greece, the lenders will back off in Spain”.

The Slog’s Frankfurt Maulwurf seems fairly happy at the turn of events. Here’s his version:

“Chancellor Merkel has come under enormous pressure in recent weeks from the German banking community, and also from her own [CDU] colleagues. The advice has been clear: unless we stop somewhere, the problems will go on and on and cost more and more – with only Germany left standing. There can be no doubt that Signor Draghi has helped in this regard….he has influence with [Merkel] and also he is more proactive than Trichet was in providing financial support in the right places. For the first time now, we see those trying to take advantage of our situation on the back foot. This can only be for the good of all Europeans”.

We have to remember in all this that our Bankfurt friend is very much a hawk in the ‘keep the EU affordable or walk away from it’ tendency. He is also firmly of the view that FiskalUnion is central to that:

“Where Draghi’s influence has been crucial is in keeping the French from diluting the rules of the Fiscal Pact.  He is totally in accord with Frau Merkel on this. There is no doubt in my mind that the eurozone is in better shape to face the future than it was before Christmas”.

Whether that is really true remains something about which I’m deeply sceptical. Although Charles Dallara of the IIF continued to make nice noises from his appointment in Paris, some of the creditors involved in Friday’s shock-and-awe moment were talking about “drawing a line in the sand at 3.8% and saying take it or leave it”.

“I heard two guys say on Friday, ‘this is a deal-breaker’ – and they meant it,” says my Athens source. So we really do have a stand-off, and from here on it is the classic ‘who blinks first?’ situation. Early today I had input from Paris. I will give you the key paragraph:

“It isn’t just about the EU’s strength, it is also about the hopeless position of Greece. Their economic data gets worse by the month, and so the mountain they must climb gets steeper and steeper. Any expensive deal in Athens would simply be a stay of execution.”

But then – much as I love him – that source is a French diplomat. My feeling remains that the Brussels view on Greece is they are a concern only so long as they are a liability. And I still feel – no, I know – that only a 100% write-off of all its debt today (followed by an immediate injection of economic stimulation) would give the Greek People a fighting chance of survival within the single currency. Clearly, that isn’t going to happen.

“The elements of an unprecedented voluntary private-sector involvement are coming into place,” puffed Charles Dallara to Bloomberg yesterday. As Eric Morecambe might have said, “We have all the right elements…just not necessarily in the right order”.