The copious government stimulus packages helped bring the eurozone’s exchange traded funds (ETFs) back to life, but like many developed areas, it’s time to tread carefully around monetary policy.

Governments of the European Union will need to reduce deficits and public debts that were incurred during the revitalization process of their economies, or the European Central Bank will raise interest rates, hampering the region’s economic recovery, reports Paul Taylor for The New York Times.

The Bruegel research group proposed that the E.U. should recapitalize and restructure banks, cut budget deficits and tighten monetary policy – in that order. (Four reasons Europe could make a comeback).

Meanwhile, the recovery could be uneven and various countries tackle their problems in their own way:

• E.U.’s Monetary Affairs Commissioner Joaquin Almunia stated that Germany’s unbalanced economic strategy failed to raise domestic demand and caused problems for the whole region.
• France and other countries were unable to consolidate their budgets and went into the crisis with high deficits.
• The current situation shows individual countries in the eurozone striving for their own well-being, and in Germany’s case, at the expense of others. (Watch Tom talk about Europe on CNBC).

Instead of picking individual countries if recovery will be uneven, a better way to invest in Europe may be through an ETF covering the region – this helps mitigate your risk.

• iShares S&P Europe 350 Index Fund (NYSEArca: IEV): up 32.9% year-to-date

• Vanguard European Stock (NYSEArca: VGK): up 36.2% year-to-date

• BLDRs Europe 100 ADR Index Fund (NYSEArca: ADRU): up 33.9% year-to-date

Countries that use the euro sent their finance ministers to meet as the euro appreciated against the dollar, reducing gains that would have aided the region’s economic recovery, writes Aoife White for The Associated Press. The eurozone’s foreign exports dropped 23% in August year-over-year, the quickest drop this year.

The eurozone is projected to pull out of the recession in the third quarter. Rising unemployment is still a problem for the region. (Our definitive guide to currency ETF investing).

For more information on Europe, visit our Europe category.

• CurrencyShares Euro Trust (NYSEArca: FXE): up 7.7% year-to-date

Read the disclaimer, Tom Lydon is a board member of Rydex Funds.

Max Chen contributed to this article.

Tags: ADRU, Currency ETFs, Euro, Europe, FXE, Global ETFs, IEV, VGK