Page 1 of 2

Jeremy Glaser is the markets editor with Morningstar US.

August has been a breath of fresh air compared with the summer turmoil of the last few years. There were no debt-ceiling debates or enormous market sell-offs, but there was reduced volume and volatility. Overall the market rose 1.5 per cent during the last four weeks as investors took a (much-needed) break.

The market's permission slip to take this break was signed by European Central Bank (ECB) head Mario Draghi earlier this month. His comments that he is ready to do whatever it takes to save the euro and that the common currency is irreversible were seen as the clearest sign yet that the ECB was ready to peruse more unconventional means to stem the crisis.

Add in some news reports that Germany's chancellor Angela Merkel was ready to be more accommodative and concede some ground in order to help ease negations with debtor nations, and the tension level seemed to have dropped dramatically.

Certainly, these are all-important steps in the right direction, but the underlying problems are still very much with us. As the global vacation wraps up, economic leaders will need to translate a number of issues from talk to action fairly quickly in order to keep markets relatively placid and set the stage for ending the crisis.

ECB must follow through

First up, the ECB needs to put more concrete policies to Draghi's words of support. Right now we just don't know exactly what the central bank is willing to do to keep rates on peripheral country bonds low and keep the euro together.

Will the central bank start buying massive quantities of sovereign debt to keep those key rates low? Is there an upward bound on how high yields can go? Will there be strings attached to the purchases?

We should hear more from Draghi soon, and details of the plan will be crucial. If the bank is able to act quickly to bring down the still very elevated yields on Spanish and other bonds, it will go a long way to credibly setting a sovereign debt yield ceiling.

However, if the details of his plan are more wish-washy than expected, investors could quickly start to lose patience and doubt the ECB's resolve. Draghi has been saying the right things to keep the euro together, but the proof here is really in the pudding.

Banks need help

Many European banks remain on the edge. Institutions remain undercapitalised while deposits are fleeing banks in weak countries as customers fear bank failures or redenomination. There is little doubt that a number of banks are going to need fresh cash infusions, but where the money will come from remains in question. Forcing countries like Spain to borrow more to shore up their banks is a counterproductive solution as it exacerbates an already-hefty debt load.