The three most important things that happened were (1) beginning operation of the European Stability Mechanism (ESM) and (2) the jaw-boning promise of the European Central Bank (ECB) to do “whatever is necessary” to maintain the Euro and (3) the promise of a unitary banking system to be regulated by the ECB.

What did NOT happen:  Fiscal integration of the 17-member nations, i.e., surrender of fiscal sovereignty over their budgets.  (Just imagine if the United States had to submit our budget to the United Nations for approval.)  This is the eventual solution to the problem of the European Union but won’t happen anytime soon.

In the meantime, the five PIIGS of Europe (Portugal, Ireland, Italy, Greece, & Spain) have embraced severe austerity or, more correctly, had austerity crammed down their throat.  Unemployment in Spain and Greece, for example, is now worse than in the United States during The Great Depression era of the 1930s.  Partially as a result, the all-important debt-to-GDP ratio is starting to improve or at least stabilize.  In fact, Ireland is making a historic and heroic turnaround!

The European Financial Crisis is not going away anytime soon and is likely to remain on the backburner for awhile.  So far, the ESM has not needed to make any loans, and the ECB has not bought any sovereign bonds of the PIIGS.  Once we are past the German elections in September, assuming Merkel wins big, fiscal integration may actually move a step or two closer.

Still, it remains the biggest “wet blanket” on the stock market, because it could trigger a financial collapse, which is far worse than a normal recession.  However, with it on the backburner, we now have the luxury of obsessing over something else, like the ongoing U.S. budget drama.

Remember:  Wall Street is ALWAYS facing a “Wall of Worry.”  Sometimes the wall is tall, sometimes not!

As long as the 800-lb-gorilla known as the European Financial Crisis continues to simmer on the backburner, it is more likely to have a happy ending.