The markets are rejoicing on the European plan to deal with the credit crisis. Although many commentators are saying it is inadequate, I think European leaders still deserve some credit. It is not easy to get stuff done when you have 17 members to deal with. Getting 17 parliaments to unanimously approve the EFSF and getting private debt holders to agree to a voluntary 50% haircut on Greek debt are positive accomplishments.
The key measure of the success of this program will be if it avoids the debt problem from spreading to Spain and Italy. Unfortunately it doesn’t appear that is yet the case, at least for Italy. So Keep a close eye on the Italian and Spanish 10 year bond yields. If they go much above 6% then Europe would be in trouble again. Here are the links to see Italian and Spanish bond yields.