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

Consumer sentiment fell in the early part of this month to the weakest in three months. Concerns about jobs and income continue to weigh on consumers’ minds, Reuters reports. This could mean restrained spending around the holidays. (How to play retailer’s price wars).

The U.S. trade deficit widened in September by a larger-than-expected 18%, the highest level since January. Imports also jumped by the most in 16 years. The trade deficit’s growth reflected increasing demand for oil and cars amid the economic rebound, reports Bob Willis for Bloomberg.

Oil prices dipped to their lowest point in a month as investors began to pay more close attention to the slump in demand for energy. Although for much of the year many thought demand would resume, consumers and businesses are still using less gasoline than they were a year ago, says Chris Kahn for the Associated Press. United States Oil (NYSEArca: USO) is trading flat this morning.

Europe has officially left its recession. The eurozone economy was largely propelled back to health on the strength of export growth and improving industrial production in Germany, its largest economy. GDP for the 16 countries making up the region expanded by 0.4% in the second quarter, reports Matt Saltmarsh for The New York Times. iShares MSCI Germany (NYSEArca: EWG) is up 1.2% this morning. For more stories about Europe, visit our Europe category.

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 both reported increases in growth and the numbers have convinced some analysts that Europe’s economy is recovering, perhaps even faster than that of the United States’, reports Charlie Parker for Citywire.

There are some risks, though:

• Some economists think, however, that the improved numbers may not be a show of overall economic strength but rather a fall in imports as exports remain the same, which would come up as a stronger net trade.

• The unemployment rates in Germany and France may also be misleading because of the larger public sector. It is seen that the fall in production in Europe did not reflect an equal fall in unemployment. The economies could suffer later from the excess weight.

• The European Central Bank has cut its benchmark interest rate to a record 1% low and begun a $86 billion program of buying assets, writes Simon Kennedy for Bloomberg. Officials are regarding the economic recovery with caution and won’t be reversing their policies any time soon.

• The ECB projected that the European economy may contract 4.6% this year and contract 0.3% in 2010. Deutsche Bank estimates a 1.3% contraction next year and UBS AG predicts 2.1%.

One way to access the European market is through the PowerShares FTSE RAFI Europe (PEF) ETF. PEF, currently up 42% year-to-date, tracks the performance of the largest European equities in the FTSE RAFI Europe Index, which normally invest 90% of its total assets in securities that comprise the Index and ADRs based on securities in the Index, as stated by InvescoPowerShares. The ETF has 526 holdings with an expense ratio of 0.75%.

• Country allocations: United Kingdom 30.6%, France 14.7%, Germany 13.3%, Italy 7.6%, Switzerland 6.4%, Netherlands 5.8%, Spain 5.3%, Sweden 4.0%, Ireland 2.6%, Belgium 2.5%

For more information on Europe, visit our Europe category.

Max Chen contributed to this article.

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.

While the United States is increasingly making a big push to use more green energies and solar energy has a promising future here, 2009 is not going to be our year to become a leading market for solar panels, reports Ucilia Wang for Greentech Media.

Make no mistake – the United States is a promising market, but we still lag behind other countries such as Germany, Spain and Japan. Our market is also expected to shrink in 2009, while Germany’s large appetite for solar power should make up the difference. In March, China also announced a big push to step up its solar power capacity.

The tax credits and rebates put into place to help spur the industry here, but they require consumers, businesses and investors to line up their own financing, which in this climate is still tough to come by. The government is supposed to provide money to developers to finance these projects if they forgo the 30% investment tax credit, but the program hasn’t been started yet.

Spain is the number one market; Germany is number two, but could reclaim the top spot this year.

Both available solar ETFs have allocations to other countries besides the United States. In addition to that, some U.S. companies could be tapped to be a part of some overseas solar power projects.

• Market Vectors Solar Energy (KWT): up 16.9% year-to-date; Germany is 31%; China is 22%; Spain is 0.8%

• Claymore/MAC Global Solar Energy (TAN): up 23.2% year-to-date; Germany is 33%; China is 31.2%; Spain is 1.9%

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.

Europe’s SMEs, firms with less than 250 employees, represent a workforce of 88 million people and make up two-thirds of private-sector employment, according to the Economist.

SMEs have less assets, smaller retained earnings, fewer customers than large corporations, and they can’t spread risk by diversifying product lines or expanding to different locations. These small businesses are also experiencing dwindling demand and shortage of bank credit, but governments are starting to order banks to lend to them, provide credit guarantees, suspend some taxes and force public bodies to pay up faster.

In a recent survey, a little more than half of 804 French SMEs expect revenues to remain the same or increase in 2009.

German domestic consumption is keeping steady and it is helping to support home businesses while exporting firms are more troubled.

While in Britain, corporate liquidations increased to 4,941, up 56% year-over-year, in the first quarter and most of which were in SMEs. But a recent survey found 60% of businesses performing equivalent to or better than last year.

Small-caps in other countries aren’t that much different than they are in the United States, in that their small size makes them especially nimble and better able to adapt to changing conditions.

• SPDR S&P International Small Cap (GWX): up 10.4% year-to-date; Western Europe is 34.1%

• WisdomTree International SmallCap Div (DLS): up 7.9% year-to-date; Western Europe is 42.2%

Max Chen contributed to this article.