Europe and the markets say TGIF!!

At the end of the worst week for Europe politically and economically since the fall of the Berlin Wall here's where we are:

Greece's new Prime Minister Loukas Papademos was sworn in and the new PM pledged Greece would do everything required to stay within the euro

Italy's Senate voted through a package of austerity measures the first step in paving the way for Silvio Berlusconi to resign.

Europe's stock markets responded with rallies as did the NYSE. Critically the bond markets eased off the usury pedal and the yield on Italian bonds fell from their midweek high of 7.5 percent to 6.7 percent.

But the feeling is this is just a weekend intermission.

As I write, Berlusconi is rumored to be stepping down tomorrow … but in this story nothing is certain until it happens. And even if he is out of office before Monday his likely replacement, Mario Monti, will not take office by acclamation. There may yet be negotiation and "peacocking" by politicians who need to display their egos even if it freaks out the markets again.

It is possible Monti will be Prime Minister on Monday, but whether there will be a fully-appointed and functioning government is not certain.

But the crisis looks like it is going to widen out next week anyway. Earlier today Spain reported third quarter growth of exactly 0 … a further indication that the EU as a whole is heading towards recession.

Most ominous of all, France is beginning to get the kind of negative attention that heralded Italy's troubles. French bond yields closed the week at a four month high. This followed one of the weirder occurrences of the week: rating agency Standard and Poor's sent out a notice saying it was cutting the country's AAA rating. S & P said that it was sent in error because of a technical glitch. But in this day and age mistakes like that make people very nervous.