First, the market opened up dramatically Monday on news that Italy was getting serious about cutting spending and that France and Germany were pushing for a new European Union treaty. “EU optimism” lifted stocks for the first half of the day.

Then, the other shoe dropped. Rating gurus at Standard & Poor’s put Germany, France and Holland on watch for a possible credit downgrade. Investors who were giddy about a meeting to craft a plan to enact a solution to the European debt crisis started to have second thoughts … after all, that’s a lot of hoops to jump through before we arrive at a conclusion to this whole ugly affair. “EU uncertainty” popped up once again, and the market retreated.

It seems that most other news just doesn’t matter. European debt developments and Wall Street sentiment about the EU are moving stocks these days, plain and simple. And unfortunately, we have a few more big events ahead of us that have the potential to move the market.

The bottom line is that events across the Atlantic are too complex and too tangled in politics to fix quickly. If you think America’s government is inefficient, just imagine if there were 27 Congresses to round up on a piece of legislation! As such, there are a number of things to look for across December and into the new year as signs of how things are progressing in Europe.

Here are some things to watch for in the euro zone:

Friday’s EU Summit

In the immediate term, we will learn a lot about the viability of a European Union overhaul on Friday, Dec. 9. It is critical that Italy, Spain and at least several other countries agree to a stability pact that enforces fiscal discipline. Markets are eager to price in a favorable result in advance of the meeting — case in point, this morning’s rally. More disturbing than the idea of a market crash if the summit fizzles is the fact that purchases of sovereign debt have been slowly increasing on optimism of a productive summit.

But let’s not panic — there is a good chance that the EU approves so-called “austerity” measures, considering what’s at stake. Also, French President Nicolas Sarkozy said Monday that while the EU would prefer a treaty agreed by all 27 members of the European Union, it would OK a deal with just the 17 countries that use the euro as currency. That might lower the bar a bit.

Pending Credit Downgrades

Without a fully functional crystal ball, this will be hard to pin down, but you can bet downgrades are coming. In fact, S&P already downgraded France’s AAA debt mistakenly — and though a technical glitch was blamed, it seems too much of a coincidence to just overlook. S&P has put all 17 euro-trading nations on credit watch — 15 of them were put on watch Monday — and Fitch and Moody’s are equally suspicious. The only question is which countries ultimately will face a downgrade.

A knock from a ratings agency isn’t the end of the world — the S&P credit downgrade of America’s debt amounted to squat, as Treasury yields moved even lower and the market as a whole has rebounded nicely since August. But it can be a good measure of just how pessimistic the market is and how widespread debt contagion will be, even with a so-called “rescue plan” in the works.

Put bluntly, the S&P said Monday:

“We expect to conclude our review of eurozone sovereign ratings as soon as possible following the EU summit scheduled for Dec. 8 and 9, 2011. Depending on the score changes, if any, that our rating committees agree are appropriate for each sovereign, we believe that ratings could be lowered by up to one  notch for Austria, Belgium, Finland, Germany, Netherlands, and Luxembourg, and by up to two notches for the other governments.”

The IMF’s Ultimate Role

Rumors have started to circulate that the International Monetary Fund soon will get involved in the bailouts of Italy and Spain. And despite previous suspicions about the group’s efficacy in lending to impoverished nations, its new role as white knight in the European Union actually has cheered markets.

The technical expertise of setting and monitoring lending conditions allowed the International Monetary Fund to elbow into discussions about Greece and Ireland, and now the much bigger problems of Italy and Spain mean the bank is needed more than ever. Right now the IMF mainly plays gatekeeper to the European Central Banks’ own bailout, but if the group is tapped for significant monetary support, it could be a game-changer.

This will drag the rest of the world into the EU debt crisis — which could be good in terms of providing funding, but very bad in terms of complicating politics.

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.