Yields on Spanish and Italian debt are trading more than 1% lower than at their peak, while world stock markets have soared close to all-time highs.
Unfortunately, you can expect that all of this euphoria will fade when the Italian elections take place on February 23-24.
Why?...It's summed up in two words: Silvio Berlusconi.
That's because until recently a win by the former Prime Minister wasn't seen as very likely. Not long ago, The EU establishment believed they had the Italian elections completely wired.
The socialist "Democratic party" led by Pier Luigi Bersani was expected to win and be supported by a coalition of center parties led by the EU's favorite, Mario Monti, imposed as prime minister in November 2011.
Both of these candidates were safely pro-euro, and prepared to put Italy through a fair amount of "austerity" to keep it, provided the handouts kept flowing from Germany and the European Central Bank. The status quo wouldn't be threatened.
Meanwhile, the two anti-euro candidates were supposed to be comedians.
One is an actual comedian named Beppe Grillo, leading an eccentric "Five Star Movement," while the other is the aforementioned Silvio Berlusconi, who is currently under indictment for sex with under-age prostitutes and therefore (in the eyes of the EU bureaucracy) not seen as a serious threat.
At best it was thought Berlusconi and Grillo might get as much as 30% of the vote between them, but it wouldn't give them any significant power.
Well, let's just say things have changed.
