The Eurozone, led by Germany, is preparing to undertake a massive series of bank bailouts to deal with their banking crisis (don’t call it a sovereign debt crisis).

Germany has begun to throw its weight behind measures to guard Europe’s financial system from a possible Greek or other government debt default, as Chancellor Angela Merkel said Wednesday that she would support a continent-wide plan to pump more capital into banks if they need aid.

Merkel’s comments add momentum to an effort urged by U.S., International Monetary Fund and other officials for Europe to ensure that its banking system can survive if Greece needs to restructure its $300 billion in outstanding bonds.

Once considered unthinkable, that possibility — a sovereign default inside a major world currency zone — is now a central facet of the planning among European and IMF officials, who are trying to both keep Greece afloat and buffer the broader regional economy against the chance that they may not succeed.

I suppose the idea here is that a Greek default would be too disruptive and cause too much of a collapse of confidence in the Eurozone without being paired with free money to bankers. Essentially, Greece is a pass-through for European banks relying on their bailout cash, so if you allow Greece not to pay back the bankers and pay them directly, problem solved! Sigh.

This is being put into less conspicuous terms like “recapitalizing” the banks, but I don’t see any effort to nationalize them, to remove boards of directors, to give shareholders and bondholders a major haircut, or anything else other than providing European banks with free money to make up for a Greek default.

This has been the IMF recommendation as well, so it is may garner unified support among the Eurozone. But that’s not certain:

Germany, the euro zone’s wealthiest member, seems politically inclined for each nation to protect its own banks. So is the affluent Netherlands. But France, the most dominant euro economy after Germany, is cautious about the whole exercise and is likely to lean toward an approach drawing upon the resources of the euro zone’s bailout fund — an approach the I.M.F. favors. “Germany is prepared to move to recapitalization,” Mrs. Merkel said in Brussels, adding that other European countries should do the same with their banks. “We are under pressure of time,” she said. “I think we need to take decisions quickly.”

The implosion of the French-Belgian bank Dexia, which led yesterday to an increasing series of withdrawals of cash by depositors, seems to have been the linchpin for this new policy. Dexia was a bank that passed previous European stress tests. The European Banking Authority readied a new round of stress tests to determine why Dexia so quickly went south.

While European Commission leaders aren’t saying much, and downplaying the preparations, it’s pretty clear that there’s a big bailout plan on the way.