Europe is now facing a serious crisis. The bond market is closing to euro-zone sovereign countries — and those that are open are charging exorbitant rates. 5.59 percent for 10-year Belgian debt ? Please.

And yet, Germany still seems to be focused on academic issues around treaty changes. Ms. Merkel has said that there is a need to amend the euro-zone treaties to allow for more supranational supervision of budgets. In other words, euro-zone members are going to have to hand over control of their national budgets to Brussels in the future as part of an "all-in" strategy to keep the euro zone together.

This will be a major topic at the December 9 meeting of EU leaders.

This is certainly a necessary step...but it will likely take a couple years to get these treaty changes through.

The priorities are all wrong.

There are two urgent priorities European leaders must focus on: 1) how to achieve an orderly rollover of sovereign debt, and 2) how to guarantee bank financing.

There is some good news on priority one: yesterday (Tuesday), the IMF created a new line of liquidity which member countries can tap on a short-term (6 month) basis.

On November 29-30, EU finance ministers will be meeting and should address priority two. They will get the EFSF up and running, announce how much leverage will be used, but there will surely be a healthy debate on whether the EFSF should get a banking license from the ECB to allow much greater lending to sovereign countries and banks.

The issue about the mandate of the ECB — solely around price stability — should be addressed and put to rest at these meetings. This "academic" reading of the ECB's role is threatening to create a central bank that is presiding over price stability with an imploding economy.

It's simple: price stability is meaningless without financial stability.

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