Stocks surged in the United States and around the world today as markets reacted to the latest news out of Europe. We’ve had so many deals and false starts, but it looks like serious progress might be at hand in Europe.

By the end of a vital two-day summit here, European diplomacy had played out like soccer, with Spain and Italy — the two nations headed to the Euro 2012 finals — emerging victorious and the Germans returning home in shock.

After a marathon 14 hours of talks, Berlin unexpectedly agreed to concessions clearing the way for a deal that could help both Madrid and Rome in their desperate efforts to stave off economic collapse.

The agreement, while conditional on the creation of a regulatory body, addressed the core of the questions facing Europe: Who will cover the tab for its 2½-year-old debt crisis, and how?

Under the terms of the deal, troubled euro-zone countries would have more options for aid, including using a pool of European rescue funds to directly recapitalize ailing banks. That, in turn, would spare governments the humiliation of having to ask for aid themselves to channel to domestic banks, sidestepping the kind of intrusive financial inspections imposed on Greece, Ireland and Portugal.

The big change has to do with the decision to directly fund the troubled banks. Check out the whole article for the story, but it looks like Germany will cave here.