The announcements coming out of Europe tonight are dramatic, and they confirm that policymakers have shifted to a "whatever it takes" approach to crisis management. The result is a massive policy response by the EU and ECB aimed at calming markets and safeguarding the euro. Other central banks are lending a helping hand.

The immediate reaction in global markets is to reverse some of last week's moves that were caused by concerns about Greece, sovereign risk, and related risk aversion. Specifically, the announcements have led to a surge in equity markets, a strengthening of the euro, a fall in the price of gold, and a tightening in risk spreads on sovereign and corporate instruments.

Market participants will now spend a lot of time analyzing the minutiae of this dramatic policy response … this with a view to assessing its immediate impact, its durability, and the potential range of unintended consequences.

Many questions will need to be answered. They range from the operational (how will all these interventions be approved, financed and executed), to the conceptual (what does this mean for institutional integrity), to effectiveness (will the liquidity injection be used to support fiscal consolidation or end up deferring it).

Tonight, Europe has done much more than boldly step up in its policy response; it has taken it to a completely new level and dimension. We are now in unchartered waters when it comes to how all this will impact the secular workings and make-up of the eurozone.

These additional articles from Bloomberg may also be of interest: ECB to Intervene in Bond Market to Fight Euro Crisis by Gabi Thesing, Jana Randow and Simon Kennedy and EU Crafts $962 Billion Show of Force to Halt Crisis by James G. Neuger and Meera Louis. Here is a section from the latter:

"It might temporarily calm nerves but questions will come back later on how they will pay for this package when all of them need fiscal consolidation," said Venkatraman Anantha- Nageswaran, who helps manage about $140 billion in assets as global chief investment officer at Bank Julius Baer & Co. in Singapore.

The MSCI World Index climbed 2.6 percent to 1,128 at 12:15 p.m. in Brussels. Standard & Poor's 500 Index futures rallied 4.4 percent. The euro appreciated 2 percent to $1.30. Crude-oil futures gained 3.4 percent.

"The message has gotten through: the euro zone will defend its money," French Finance Minister Christine Lagarde told reporters in Brussels early today after markets punished inaction last week.

ECB policy makers said they will counter "severe tensions" in "certain" markets by purchasing government and private debt, and the bank restarted a dollar-swap line with the Federal Reserve.

'Overwhelming Force'
"This truly is overwhelming force, and should be more than sufficient to stabilize markets in the near term, prevent panic and contain the risk of contagion," Marco Annunziata, chief economist at UniCredit Group in London, said in an e-mailed note. "This is Shock and Awe, Part II and in 3-D."

Treasuries tumbled on investors' increased appetite for risk, with yields on benchmark 10-year U.S. notes rising to 3.57 percent from 3.43 percent at last week's close. German bunds also declined, sending 10-year yields up 18 basis points.

The steps came after failure to contain Greece's fiscal crisis triggered a 4.1 percent drop in the euro last week, the biggest weekly decline since the aftermath of Lehman Brothers Holdings Inc.'s collapse. European stocks sank the most in 18 months, with the Stoxx Europe 600 Index tumbling 8.8 percent.

The ripple effect in the U.S., including a brief 1,000- point drop in the Dow Jones Industrial Average on May 6, prompted President Barack Obama to call German Chancellor Angela Merkel and French President Nicolas Sarkozy to urge "resolute steps" to prevent the crisis from cascading around the world.

Eoin Treacy's view Today's events demonstrate Europe is willing to do what is necessary to avoid a deepening of the peripheral sovereign debt crisis. Just where fiscally straitened governments are going to get the money to fund this package does not appear to be occupying the minds of investors just yet but that would appear to be only a matter of time.

When the USA found itself in a similar situation with Fannie Mae, Freddie Mac and the financial sector generally, it resorted to quantitative easing in order to fund the various purchases necessary to supply liquidity. Quantitative easing remains taboo in Frankfurt but offers one of the only viable solutions to funding additional bailouts. Greece, Ireland, Portugal and Spain will have to follow through on extreme tightening measures not only this year but in 2011 and 2012, and it is not at all certain that the appetite for such austerity exists in every one of these countries.

To me at least, these measures suggest that the crisis has been postponed for a while rather than fixed. In the meantime, 'risk assets' are benefitting from at least short-term alleviation of a potential euro breakup, additional injection of liquidity and short covering.

As I mentioned in the Subscriber's Audio in Friday, a large number of markets had pulled back to test areas of potential support near their 200-day moving averages or progressions of rising reaction lows and needed to find support relatively quickly if further trend deterioration was to be avoided. Most stock and commodity markets posted upward dynamics today, indicating they have found at least short-term support. Last week's lows, particularly where these coincided with the above mentioned areas of potential support, would need to be taken out to offset scope for some additional firming.

The Euro rallied early in the session but gave up its advance as the day continued and finished in negative territory against most currencies, suggesting that while the currency may have been saved from extinction, the measures needed to ensure its survival probably require it to trade at somewhat lower levels. The Eurozone's exporters should continue to benefit from a weaker currency.