What do you mean "Jewish problem?".
He means the fact that Jews in Eastern Europe were oppressed and excluded to the extent that, at the time, it seemed that integration into the majority society was never a viable option. With the benefit of hindsight it seems that this could have happened in a less dystopian 20th Century (if Eastern Europe's 20th Century wasn't a dystopia, the term has no meaning). It certainly seemed unlikely at the time, however.
I am a little uncomfortable with the term though, given that historically it had very racist and even genocidal connotations. I know that in the 1910's timeframe it wasn't perceieved that way - one might also have spoken of the Polish Problem, the Irish Problem, etc., and often with the most beneficial of intentions. Even so, it might be better to be clearer in the OP if not in the thread title.
There are three plausible options for World Jewry at this point, politically speaking: a Yiddish speaking state in Eastern Europe, a Zionist state in Palestine, or political (if not linguistic) integration over time into the local majorities. The first two - and perhaps the third as well - require a Great Power sponsor, or an exceptional amount of luck. Mass emigration and genocide are the other, more depressing, possibilities, of course.
I don't see a Sephardic statelet in Salonica as realistic by this timeframe, btw. The city did have a Ladino-speaking Jewish majority in the early 20th century, but what power is going to end up simultaneously opposed to Greek, Bulgarian, and Turkish claims? The right POD might give you a British protectorate that evolves in that direction, but it would have to be long before WWI.