European stock markets surged today, and Spain saw its cost of borrowing fall, as investors shrugged off EU leaders' failure to agree on individual contributions to a proposed €200bn loan to the International Monetary Fund.
The German Dax and French CAC-40 closed up 3.11% and 2.73%, respectively, while the FTSE-100 gained 1.02%, buoyed by stronger than expected housing data from the US - seen as a bellwether for the economy - and by good news out of Spain.
An auction of Spanish short-term debt on Tuesday morning saw strong demand and saw yields - the amount of interest that investors demand on the bonds - fall markedly. The main reason, analysts said, was an unprecedented step by the European Central Bank (ECB) to offer 3-year loans to eurozone banks at low rates of interest.
Unlike Greece or Italy, Spain's major problem is not its national debt - which currently stands at around 60% of its gross domestic product (GDP) - but the perceived weakness of its banks. Those banks are seen as undercapitalised - i.e. they do not have enough money or liquid assets to absorb any external economic shocks.
If that shock did occur, the Spanish government would have to bail its banks out, massively adding to its own debt and throwing its budget deficit reduction targets way off track.
However, Spanish banks have struggled to raise capital internationally to remedy the problem because of that same concern - that the Spanish government could not afford to bail them out - meaning that they were stuck in a kind of financial Catch-22 that was getting worse by the month.
The ECB's programme of offering banks cheap money for three years goes some way to ending this spiral, or at least giving banks and the country some respite.
Italy, however, remains an unresolved problem heading into the Christmas break.
Policymakers were unable to agree on bilateral contributions to a €200bn loan to the IMF that would have gone some way to building a "firewall" of bailout money should the country need it.
Italy has several hundred billion in debt maturing over the next couple of years and, with markets uncertain over whether its government can make good on demands to reform its economy and cut back on public spending, its cost of borrowing has risen to unsustainable levels.
Many in the markets have been hoping that the ECB would print money and engage in quantitative easing, a move that has been resisted by Germany, which holds the most powerful lobby in the eurozone, and by the bank itself.