Europe is approaching one of those big points in history, courtesy of a broken, almost bankrupt Greece.

Overnight Standard & Poor’s hammered one of the final nails in Greece’s coffin by slashing its credit rating to Triple C, two levels above default (bankrupt). That led to a stampede by the eurozone’s finance ministers into another one of those fruitless meetings where they humm and harr for hours while trying to get Germany to shape up and tell them what to do — and then ring the European Central Bank and be told by Jean Claude Trichet what he wants them to do.

And in Italy, which is now on a credit watch negative from a couple of rating groups, Prime Minister Silvio Berlusconi suffered his second major defeat in two weeks when several referenda, including one allowing the country to return to nuclear power, were overwhelmingly rejected. The vote has raised questions about the immediate future for Italy and the Berlusconi administration.

For weeks now Germany and the ECB (with support from France) have been fighting each other over rescuing Greece for a second time, with the debate spilling over into public forums, the media and the markets.

Germany wants private bondholders to wear some of the cost of bailing Greece out a second time; the ECB is resisting that default causing approach because it seems the dangers (quite rightly) to Europe’s still fragile banking system (and to the ECB’s own financial standing: it is a big holder of debt from Greece and other bailouts) are greater.

It also fears that once the dam is broken the bailout of Ireland will be under threat and the impending aid package for Portugal will be torn apart and rebuilt at Germany’s insistence.

So the S&P move, coming as something of a shock to markets (but not causing them to fall out of bed), saw news of the emergency meeting of European finance ministers tonight (our time) to try and sort out the refinancing/bailout of Greece in what could be a 172 billion (around $A230 billion) euro package, which included the original 110 billion euro first round from a year ago. As the Financial Times reported:

Senior European officials said hardening positions on both sides made it unlikely that the standoff would be resolved at the afternoon meeting of eurozone ministers, which will be followed by an evening session involving all 27 EU nations. But officials saw hope that ministers would be able to focus the dispute, so that negotiators could strive to achieve a deal before next week’s ministerial meeting, where the programme is due to be finalised.

At issue is whether current holders of Greek bonds will be asked to swap them for new, longer-maturing bonds that would push off Greek repayments to the end of the decade — a plan backed by Germany.

The ECB has resisted such a move, insisting it would amount to a de facto default. Instead, it wants bondholders whose debt comes due over the next three years to purchase new, longer-maturing debt voluntarily — a so-called debt rollover. The ECB and the French government think such a plan is less likely to trigger a default and further market turmoil.

The road taken will be critical to determining how much new bail-out funding Greece will get from the EU and the International Monetary Fund. Of the €172bn Greece is expected to need to the end of 2014, about €87bn is already accounted for: €57bn from Greece’s existing EU-IMF bail-out, and another €30bn from a privatisation programme finalised this month.

That leaves 85 billion euros to be found, either from forcing more money out of the EU and the IMF, or making sure bondholders wear a big haircut, either through a conventional refinancing or through something a bit more exotic.

And over in Italy we had a small tremor run through the country when a series of referenda, one of which was to approve a return to nuclear power, were beaten. The poll saw more than 90% of people rejecting it.

The result represented an overwhelming setback for the prime minister, who had tried to thwart the outcome by discouraging voters from taking part by forcing his and the state-owned TV networks to run minimal coverage of the issues since a court two weeks ago ordered the poll be held on Sunday and yesterday. The government had tried to abandon the referendum on nuclear power after voting to shelve it last month.

Official projections showed more than 95% of voters rejecting a referendum to allow water privatisation and a third suggested law that would have allowed Berlusconi and other ministers to cite government business as a reason for delaying trials in which they were defendants. The expected majority against nuclear power was 94%.

More importantly, the nuclear power referendum met the constitutional requirement that at least half of Italians had to vote for it to be binding. Interior ministry figures projections indicated that more than 57% of the electorate had taken part. The 50% requirement was met in the other referendums, which means Berlusconi will now have to front up personally to the various court cases, especially the current one involving allegations of s-x parties at one of his villas involving an under-age woman.

More importantly, it was the second rejection by voters in a fortnight: his party, the Freedom People movement, along with the isolationist Northern League, saw many of its candidates lose local government elections in May, especially in Milan — his power base.

The court decision ordering the nuclear vote to go forward was the big blow. Berlusconi had been hoping to remove this highly emotive issue from the ballot, thereby keeping people at home and hopefully allowing the other votes to be defeated by the 50% rule. That failed and his future is now open to question.

But a lack of leadership is not what Italy now need, as it comes to the attention of nervous financial markets. A default by Greece could hit Italy hard, weakening its support among investors. Italy has the third largest government bond market in the world after the US and Japan, so the country matters in terms of global financial stability.