After feeling the effects of the financial crisis, the European economy is out of a negative growth pattern, boasting 0.4% growth in the third quarter. Matthew Saltmarsh for The New York Times reports that other factors that signal a turnaround include a stronger currency and growth in countries such as Germany and France. (Why it takes more than a stronger currency for growth to resume).

Recovery in the region as a whole is mixed, though. Unemployment remains startlingly high in some areas, wages have stagnated and lending still needs a push to operate at full strength, Terence Roth and Christopher Emsden for The Wall Street Journal report. Greece, Finland and Spain are still contracting.

Although these economies continue to struggle along, industrial countries centered in the region’s economic core are setting the pace for an overall recovery. (Sweden has been a recovery leader). To play the recovery with ETFs, look for those areas that are sitting above their long-term trend lines (the 200-day moving average). Europe can be accessed via either broad, regional ETFs or some strong single-country funds.

For more stories about Europe, visit our Europe category.

• iShares MSCI Germany Index (NYSEArca:EWG): up 19.2% year-to-date

• iShares MSCI EMU Index (NYSEArca:EZU): up 28% year-to-date

• SPDR Dow Jones Euro STOXX 50 (NYSEArca:FEZ): up 25.8% year-to-date

• iShares MSCI Sweden Index (NYSEArca:EWD): up 62.3% year-to-date, one of the best

• iShares MSCI Austria Index (NYSEArca: EWO): up 67.9% year-to-date

According to Gary Gordon for ETF Expert, there is a slight discernible difference between the five largest net exporters and net importers as shown in their respective ETF growths.

Net importers’ five-year total % change:

• Vanguard Total U.S. Market (NYSEArca: VTI): 12.8%
• iShares MSCI United Kingdom (NYSEArca: EWU): 10.7%
• iShares MSCI Spain (NYSEArca: EWP): 91.7%
• iShares MSCI France (NYSEArca: EWQ): 35.1%
• The India Fund (NYSE: IFN): 129.4%

Net exporters’ five-year total % change:

• iShares FTSE China 25 Index (NYSEArca: FXI): 173.9%
• iShares MSCI Germany (NYSEArca: EWG): 53.9%
• Central Europe/Russia Fund (NYSE: CEE): 91.3%
• iShares South Korea (NYSEArca: EWY): 90.5%
• iShares MSCI Netherlands (NYSEArca: EWN): 46.3%

The data shows that percentage gains are leaning toward exporters and developing countries, more export-dependent, are producing larger percentage returns.

Gordon makes the distinction that successful investing in seemingly export-type countries is more dependent on overall economic growth and less to do with the large “net exporter” moniker.

For more information on ETF trends, visit our trend following category. Read more of Gary Gordon’s ETF observations at ETF Expert.

Max Chen contributed to this article.

GDP returned to a pattern of growth in the second quarter for Germany, Europe’s largest economy. Rainer Buergin for Bloomberg reports that the Kiel Institute for World Economics is calling for a 4.9% in shrinkage in 2009 for the country. The GDP is anticipated to grow 1% in 2010.

Indicators are improving and many are at low levels, with strong economic supporters to suggest the upward momentum. The European Central Bank won’t need to lower its main lending rate to 0.75%, the Kiel institute said, revising a June prediction. A key interest rate of 1% through 2010 should prevail.

• iShares MSCI Germany Index (NYSEArca:EWG): up 15.3% year-to-date

For more stories about Germany, visit our Germany category.

Germany and France each experienced 0.3% growth from the previous three-month period, Angela Charlton and Maria Danilova for Yahoo! News. In the previous quarter, Germany contracted 3.5% and France’s economy diminished 1.3%. The unexpected increase helped the eurozone to contract only 0.1% compared with the anticipated 0.5%.

The turnaround in the two countries is attributed to, among other things, government programs that supported the auto industries within the countries. The so-called “Cash for Clunkers” was one such program that helped economies by enticing consumers to buy again. The German government reported a rise of 7% in German exports during the month of June.

There are still some problems European countries need to grapple with, however. Europe still faces a rising unemployment rate and the expiration of the auto incentives could dampen consumer demand.

The better-than-expected performance of the region has helped strengthen the euro, which is around $1.40. But, a higher euro translates into more expensive eurozone products, which could hurt already beleaguered European manufacturers.

• iShares MSCI Germany Index (EWG): up 5.2% year-to-date

• iShares MSCI France Index (EWQ): up 10.6% year-to-date

For more information on European countries, visit our Europe category.

Max Chen contributed to this article.

German exports rose 0.3% in May from the month before while imports dropped 2.1%, increasing Germany’s trade surplus to $14.4 billion, a level last touched upon in December of 2008, according to BBC News. Exports, however, were still 24.5% lower year-over-year. Germany is one of the world’s largest exporters.

The economy minister Karl-Theodor zu Guttenberg says Germany will not stray from its current export business model. Industrial output rose by 3.7% in May compared to April, factory orders have improved by 4.4% in May and confidence in companies are on the rise.

Chancellor Angela Merkel and her coalition government have spent $118 billion in economic stimulus but still project a 6% contraction for the year, reports Simone Meier For Bloomberg.

German carmakers are increasing output to capitalize on a new government incentive to trade in old vehicles and to bolster inventory for export demand.

Household spending may decrease and hinder a recovery as unemployment continues to rise. Joblessness increased 8.3% in June and the Bundesbank expects it to increase to 10.5% next year.

• iShares MSCI Germany Index (EWG): down 8.4% year-to-date; up 5.5% in the last three months

For more information on Germany, visit our Germany category.

Max Chen contributed to this article.

Starting off with the bad news, Germany recently announced its biggest GDP drop as international demand plummeted and businesses were forced to cut back to cope with mounting loses, says Bret Neely for Marketplace.

Economists such as Irvwin Collier believe Germany did all the right things – the country’s combined $102 billion stimulus package shored up consumer confidence and led to slightly more consumption. But the type of economy in place, primarily an export-driven one, was very susceptible to international influences. Last year, exports amounted to $1.3 trillion, which is more than China.

As unemployment rises, the German populace is starting to question the export-based model and whether to continue with this 60-year-old model or change it up. Axel Weber, president of Germany’s Central Bank, has advised the need to switch to a service oriented industry and not stick to manufacturing. He also admits this won’t happen anytime soon.

Some business owners are not too worried about being overly dependent on exports since sales have already started to pick up. Older citizens that remembered the industry during World War II likens the current recession as a “hiccup.”

• iShares MSCI Germany Index (EWG): up 3.8% year-to-date

Max Chen contributed to this article.

Recessionary stress on the German economy, the largest in Europe, is easing, reports Simone Meier for Bloomberg. The economy shrunk 3.8% in the first quarter, the most since records started in 1970, and the government estimates a 6% contraction for the year.

Chancellor Angela Merkel has announced $112 billion to pull Germany out of its worst recession since World War II. The European Central Bank has reduced benchmark interest rates to record low of 1%. The full impact of the fiscal and monetary policies will not be felt for a while.

The ZEW Indicator of Economic Sentiment for Germany reached 31.1 points, a three-year high, in this month, according to China View.

The decline in industrial production has started to reverse. Exports and incoming orders are on the rise again. But the worst could be yet to come for Germany’s labor market.

Can Germany sustain the improvements it has made in recent months? Watch the trend lines to see for sure – the fund is hovering just below the 200-day, so it’s close.

• iShares MSCI Germany Index (EWG): down 1.9% year-to-date

Max Chen contributed to this article.

The European Commission estimates a 5.4% drop in GDP for Germany, the largest exporter in the world, and Germany’s government projects a 6% drop, according to Economist.

Most of the damage will come from exports and this has many thinking its time for Germany to follow a new business model. The two main parties in Germany disagree, believing Germany must remain a strong exporter of goods.

But possible changes could come in either an industrial policy aimed toward domestic markets, or looser fiscal policy to increase consumption or a worldwide slowdown that could result in a correction of international imbalances, the last being the most likely of the three options.

Between 2004 and 2007, net exports resulted in 60% of growth, but the German government expects exports to fall up to 19% this year. The GDP contraction and the previous two fiscal stimulus packages will bring the budget down from balanced in 2008 to a deficit of up to 6% of GDP in 2010.

• iShares MSCI Germany Index (EWG): down 5.8% year-to-date

Max Chen contributed to this article.

Germany, the world’s biggest exporter of goods, reports that its unadjusted exports declined 23.1% and imports diminished 16.4% for the year in February, reports Paul Carrel for Reuters UK. The reduced domestic demand resulted in a 3.5% drop in manufacturing orders for the month of February.

It appears that the German economy has been hit with its worst recession since World War II. The German GDP contracted 2.1% in the fourth quarter of 2008, and analysts are projecting a greater contraction in the first few months of this year. Economists estimate a 4.4% drop in GDP for the year.

• iShares MSCI Germany Index (EWG): down 16.9% year-to-date

Compared to the previous year, French imports and exports both plummeted. It is calculated that French exports plunged 20.9% year-over-year. The masses are consuming less and companies are loath to invest.

The Bank of France projects the French economy to contract 0.8% in the first quarter. It was revised from a previous contraction of 0.6%. Analysts are estimating a minimum of a 1% drop in the first quarter.

iShares MSCI France Index (EWQ): down 14.7% year-to-date

Combined, German and French exports amounted to 45% of the Euro zone’s exports last year.

Max Chen contributed to this article.

The German consumer confidence in April is slated to drop for the first time since the fall of 2008, settling at 2.4%, down 0.1% from March, according to The International Herald Tribune. Economic expectations are at negative 32.8 points, dropping 4.9 points in March. The drop in expectations is attributed to consumers’ fear over job losses.

Poor expectations are indicating that Germany’s economy has not bottomed out and will soon reach a lower turning point, reports Sakari Suoninen and Krista Hughes for Reuters UK. The German stimulus package won’t show signs of improving the economy until after the third quarter.

It is also predicated that the European Central Bank will help by cutting rates within the next week by a minimum of 0.50%.

The government will revise the previously calculated 2.25% contraction in the economy to a possible 4.5% contraction for the year, writes Andrea Thomas for The Wall Street Journal. Commerzbank AG estimates the economy will contract 6% to 7%.

Talks over a possible third fiscal stimulus plan were rebuked by German Economy Minister Karl-Theodor zu Guttenberg as “premature.”

• iShares MSCI Germany Index (EWG): down 17.2% year-to-date

Max Chen contributed to this article.