The something is that the European Stability Mechanism (ESM) can put money directly into bank capital.  (This is what the U.S. did with TARP, and it worked well in stabilizing our banks.)  This means those banks have more money to buy government bonds, which should drive down the interest rates nations must pay.  Then, they can use those bonds they just bought as collateral to borrow even more money from the European Central Bank (ECB), which they will use to buy even more government bonds, which will be used for additional collateral . . .

Any something has been fought by Merkel for almost three years.  She said government debt of the various European nations would be “mutualized” or guaranteed by ALL nations (including Germany) “over my dead body.”  The debt was not mutualized last night, but a big step was taken.  So, why did Merkel agree to that?

Merkel wants all nations to surrender that portion of their sovereignty that relates to fiscal policy or national budgets to the EU, which is dominated by Germany.  This is the something Merkel wants but didn’t get — yet.

I’ve argued that the fix to this crisis would be a more muscular ECB.  Last night, there was agreement that ALL banks would be supervised by the ECB.  This is a big step forward, but we won’t know if the new supervisor has any real authority until year-end.

The something that is still needed badly is to remember the Rahm Emmanuel’s rule:  Never let a crisis go to waste!  Europe has an even worse entitlement problem than the U.S., and they have done almost nothing to address that.  The regulatory environment around jobs in Europe is crippling, and they have done almost nothing to address that.  They has just bought more time to issue more debt.

Futures indicate the Dow will gain about 130 points at the open.  If this something was the real fix to the European financial crisis, futures would be up well over 500 points.  The market is just happy that anything is still possible.