"Talk tough, and open the vaults."

That should be the slogan of Mario Draghi, the president of theEuropean Central Bank.

In recent weeks, the new president publicly insisted the central bank would never do any of the things that Germany opposed. The bank would not drastically step up its purchases of Spanish and Italian government bonds. It would not directly finance European governments. It would not backstop European rescue funds or print money that the International Monetary Fund could use to bail out governments.

It would do only what central banks normally do. It would lend to banks.

It turns out that may be enough to stem the European crisis for at least a few years, and go a long way to recapitalizing banks in the process.

That fact only became clear on Wednesday, although Mr. Draghiannounced his intentions on Dec. 8, when the central bank said it would offer to lend money to banks for three-year terms, in unlimited amounts, at a very low rate.

In reality, it was an offer banks could not refuse. They will initially pay the central bank's official rate of 1 percent. But if the bank lowers the rate in coming months - as it is widely expected to do - the rate on these loans will drop as well.

There is no limit on what the banks can do with the money. But there is an obvious, virtually risk-free, option. A bank can buy short-term securities of its own government and pocket the difference - up to four or five percentage points - for the life of the securities.

On the same day the central bank announced its lending offer, Mr. Draghi held a news conference at which he talked very tough. He said he was surprised that a speech he had made a week earlier had been widely interpreted as signaling the bank was ready to make large scale purchases of Spanish and Italian bonds. He threw cold water on the idea of the bank funneling money to countries through the I.M.F.

Many observers - including me - focused on what he told reporters, not on what he announced. Bond yields rose. The yield on three-year Italian bonds leaped to 6.6 percent on Dec. 8 from 5.9 percent. For Spain, the comparable rate rose to 5.1 percent from 4.6 percent. Stock prices plunged, with the main Spanish index down 2 percent and its Italian counterpart off more than 4 percent.

David Fuller's view I mentioned in last night's Audio that the ECB's loan would help Europe's banks to recapitalise via the yield curve, so this move is very similar to what the Fed has been doing since 4Q 2008.

In an uncertain world, Mario Draghi's policy at the ECB is as close as you get to risk-free profits for the banks. All they need do is buy short to medium-term government bonds in their own countries, which yield more than 1% everywhere other than in Germany. And the ECB may lower its rate further, making the loans to banks even cheaper. For Italy and Spain, where government debt yields have been a focal point of attention for months, the returns are attractive and this facility will further lower the risk of default.

In recent months Fullermoney has mentioned the growing global consensus that the Eurozone would or should break up. Whether or not the euro should have been created to begin with, or maintained for the foreseeable future is a matter of opinion and irrelevant outside the Eurozone today.

Fullermoney maintains that the Eurozone is a political construct. As such, if the core member states wish to hold it together - and if we take what they say at face value, they seem adamant to do so - then they will find the means to preserve the single currency. The details for doing this are still being worked out but it is not beyond the imagination of participants to preserve their euro.

The ECB has every interest in facilitating this process if we assume, as I do, that it is not about to become a born-again Austrian School central bank, stoically resigned to destroying the single currency which is the sole reason for its existence. Mr Draghi has just thrown Eurozone banks a three-year lifeline.

What are the implications for markets, now and in 2012?

As 2011 drags itself to a close, a bearish consensus is clearly evident, although it may be reconsidered over the holidays. Consider all the persistent talk of depression, global recession, euro break up, bank failures, S&P targets of 950 and a hard landing in China.

Of course not everyone takes this view and Fullermoney is less pessimistic because there has been evidence of support building for most stock markets since the September and October lows. We think valuations are often attractive, not least yields, despite uncertainty over earnings. Monetary conditions remain accommodative in the west and are becoming less restrictive in growth economies.

Behaviourally, a bearish consensus tells us that many investors have high levels of cash. Traders of a like mind remain more inclined to short rallies than buy dips. Among less bearish commentators there is still a consensus that 1H 2012 will be difficult, with the possibility of some improvement in 2H of next year.

However, if the economic outlook improves in 2H 2012, surely stock markets will be discounting this in 1H.

The Eurozone probably remains the key. Here, stock market indices are in overall downward trends but also show evidence of likely support building since September and October. Many are also close to their declining 200-day moving averages. If Mr Draghi's cheap loans for banks lead to a less bearish reassessment, as I suspect, it would not take much of a move to the upside for historically cheap European stock market indices to push above their MAs and break the progressions of lower rally highs.

For technical discipline, Fullermoney's less pessimistic view, particularly regarding stock markets, is reliant upon moves above the MAs and the last lower highs which define the medium-term downtrends. Conversely, breaks back beneath the November reaction lows would reaffirm overall downtrends. The charts will show us and here are some of the main European stock market indices to monitor: UKX, DAX, CAC, SMI, AEX, OMX, KFX and OBX. France's CAC remains the weakest of this group. If a more bearish scenario were to unfold, MIB and IBEX would presumably be among the more important downside leaders.

Since Europe desperately needs to revive growth, Mr Draghi may also welcome a somewhat weaker euro. To signal that credit conditions are loosening in Europe once again, I would like to see the European Ted Spread (weekly & daily) fall back more significantly. This reflects the premium in the cost of borrowing among banks above that of borrowing from the ECB. In other words, as it rises it signals mistrust and credit stress.