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.

An official from the Chinese Ministry of Commerce stated that the government will send investment and procurement delegations to Europe, reports Diao Ying for China Daily.

These outward investment ventures are seen to help stabilize foreign trade and industry structure. It is also an opportune time to start looking for overseas assets since they are now dramatically cheaper as a result of the economic downturn.

The Chinese government has sent delegations to Germany, Spain, Switzerland and Britain. They will also be visiting France later on. The trade mission already signed contracts worth more than $13 billion. Another team is also in the United States negotiating $10.6 billion in trade and investment contracts.

• Vanguard European ETF (VGK): down 0.8% year-to-date

• PowerShares FTSE RAFI Europe Portfolio (PEF): up 5.6% year-to-date

• BLDRs Europe 100 ADR Index Fund (ADRU): down 2.9% year-to-date

Max Chen contributed to this article.

Europe didn’t really have problems in subprime mortgages, but nonetheless, the effects of the United States’ problems were far-reaching. The economies of Europe are seen as tightly linked to those of the rest of the world, writes Jack Ewing for Spiegel Online International.

Bankruptcies are up 11% on the continent. Unemployment reached 7.4% in December compared to 6.8% a year earlier. The International Monetary Fund (IMF) predicts that output in the European zone may fall by 2% this year.

What are the problems?

• One issue is that there is no single government to stand up and create a coherent rescue plan. The European Central Bank has broad powers over the economy, but it has fewer policy tools like the ones implemented by the U.S. Federal Reserve.
• Europe does not have the necessary institutions with a clear mandate to respond to banking problems on a regional level. The union probably needs a single securities and bank regulator instead of a hodgepodge of national bodies, and there are talks of creating a Europe-wide deposit insurance fund.
• The EU is the United States’ largest trading partner, as well as a hotspot for Asian exports. Much of Europe is dependent on exports. Unfortunately, slumping exports, coupled with lower consumer spending, has weaker companies across Europe closing up shop. But even the healthy companies are struggling to get by, too.
• In poorer European countries, some nations have large current account deficits and they are now bogged down by the cost of repaying loans that have grown after depreciating currencies. It is seen that some countries with weakened currencies want to adopt the euro to protect themselves from further depreciations.

Europe has some competitive advantages, such as their fervent investment in nuclear, solar and wind power on top of a history of energy conservation, which makes them less vulnerable to oil shocks. Their consumer debt is also rather low and more conservative lending practices could led to a faster recovery of their financial institutions.

British Prime Minister Gordon Brown, for his part, urged Congress to “seize this moment” and pull together to fight the recession, global climate change and thwart Iran’s nuclear ambitions, reports Ben Pershing for The Washington Post. He also pushed for an agreement on rules and standards for all banks, ahead of the G-20 summit in April.

• Vanguard Europe Pacific ETF (VEA): down 17.1% in the last month
• BLDRs Europe 100 ADR Index Fund (ADRU): down 17.9% in the last month
• Vanguard European ETF (VGK): down 18.7% in the last month
• PowerShares FTSE RAFI Europe Portfolio (PEF): down 18% in the last month
• PowerShares FTSE RAFI Europe Small-Mid Portfolio (PWD): down 13.9% in the last month

It all depends on what you are specifically looking for. The various European funds have varying allocations to different companies in specific countries. They will also allow a potential investor a distinct amount of exposure with disparate expenses and performances.

Note that recent events have led the countries within the European Union to contemplate their economic hardship. The United Kingdom, a major percent holder in European ETFs, has also fallen on hard times with a recent announcement of its recession.

Nevertheless, people can still choose to invest in available European ETFs as new trends present themselves.

BLDRs Europe 100 ADR Index Fund (ADRU) has total assets of $15 million, 100 holdings, and an expense ratio of 0.30%. The fund is based on The Bank of New York Mellon Europe 100 ADR Index, a capitalization weighted index designed to track the performance of 100 European market-based depositary receipts.

Top 10 country allocations: U.K. 43.7%, France 11.3%, Switzerland 10.1%, Germany 9.4%, Spain 8.5%, Netherlands 4.4%, Italy 3.1%, Finland 2.1%, Denmark 1.1%, Ireland 1.1%

Sector allocations: consumer discretionary 3.3%, consumer staple 7.7%, energy 21.5%, financials 19.4%, health care 16.6%, industrials 4.7%, information tech 5.3, materials 6.5%, telecom services 13.7%, utilities 1.4%

Vanguard European ETF (VGK) has total assets of $16.9 billion, 513 holdings, and expense ratio of .12%. Vanguard European ETF tries to track the performance of a benchmark index that measures the investment return of stocks located in the major markets of Europe.

Top 10 country allocation: U.K. 30.2%, France 15.8%, Germany 13.5%, Switzerland 12.7%, Spain 7.0%, Italy 5.5%, Netherlands 3.8%, Sweden 3.1% Finland 2.1%, Denmark 1.3%.

PowerShares FTSE RAFI Europe Portfolio (PEF) has total assets of $4.5 million, 1000 holdings, and expense ratio of .75%. It is based on the FTSE RAFI Europe Index, which tracks the performance of the largest European equities.

Top 10 country allocations: U.K. 32.3%, France 17.1%, Germany 13.4%, Switzerland 8.7%, Italy, 7.5%, Spain 5.5%, Netherlands 4.7%, Sweden 3.3%, Finland 1.7%, Belgium 1.4%.

Sector allocations: consumer discretionary 9.9%, consumer staples 10.0%, energy 14.2%, financials 25.9%, health are 7.5%, industrials 8.3%, information tech 1.9%, materials 5.9%, telecom services 9.7%, utilities 6.8%.

iShares S&P Europe 350 Index (IEV) has total assets of $1.2 billion, 348 holdings, and an expense ratio of 0.60%. The index fund translates investment results that correspond to the performance, before fees and expenses, of stocks across a range of industries in continental Europe as represented by the S&P Europe 350 Index.

Top 10 securities holdings include: U.K. 11.5%, Switzerland 8.1%, France 2.7%, Spain 2.0%

Sector allocations: financials 18.5%, consumer staples 12.9%, energy 12.8%, health care 12.6%, industrials 8.6%, telecom services 8.6%, utilities 8.5%, consumer discretionary 7.4%, materials 6.8%, information tech 3.0%.

The passage of the bailout package in Washington did little to clear any uncertainty regarding the details of the deal and the extent to which it will actually help, reports Emily Flynn Vencat for Associated Press. This weekend, many European banks were moving fast to save any troubled banks, and made promises of protecting depositors from the credit crunch.

Analysts say that, unfortunately, Europe’s plan resembles that of the United States’ in its lack of detail, so investors aren’t feeling very confident.

In Asia, all markets were in the red, as major exchanges from the region dropped. Tokyo’s Nikkei 225 index fell to its lowest level in four and a half years, sinking 4.35%. Hong Kong’s Hang Seng index slid 5%.

As of Monday, the Federal government took extra steps to help stop the bleeding for this new aspect of the financial crisis, reports Aaron Task for Yahoo Finance.

• Doubling the size of the Term Auction Facility (TAF) auction to $150 billion each, meaning the Federal Reserve will offer to take up to $900 million in distressed assets from banks in exchange for Treasuries.
• The Feds will pay interest on commercial banks’ reserves, as authorized by the bailout.

These are regional ETFs representing Europe and Asia:

• iShares S&P Europe 350 Index Fund (IEV): down 31.3% year-to-date; 14.5% in the last month
• PowerShares FTSE/RAFI Europe Portfolio (PEF): down 33.6% year-to-date; 15.2% in the last month

• iShares S&P Asia 50 Index Fund (AIA): down 33.6% year-to-date; 12.7% in the last month
• BLDRs Asia 50 ADR Index Fund (ADRA): down 29.1% year-to-date; 12.9% in the last month

Borrowing costs were left at 4.25% by the European Central Bank, while the Bank of England held its benchmark rate at 5%, reports Carter Dougherty for the New York Times. The ECB said it would have inflation under control by 2010, something many Europeans could be looking forward to.

The ECB expects euro zone growth to hit 1.4% this year, and 1.2% for 2009. Inflation is forecast to be 3.5% for this year and 2.6% for next year. Financial market turmoil is bubbling over into Europe, with housing market downturns, soaring commodity and energy prices affecting daily lives, and weak economic activity in many places.

When a recovery shows up, the Dow Jones Euro Stoxx (FEZ) fund might be a way to capitalize. The ETF is made up of an index that tracks 50 Eurozone companies, of which are market leaders within their sectors. To clarify, the Eurozone includes most countries in Western Europe except the United Kingdom. Some of the largest companies in Europe are included in this ETF.

While Germany and France make up around 64% of the portfolio, 32% of the entire fund is in the financials sector. The expense ratio is at 32% which is fair for the immense exposure. The assets are only at $279 million, reports David Hunkar for Seeking Alpha.

Europe and the Eurozone countries are feeling the side effects of the credit crisis, with a slower-than-expected growth outlook for the entire economy, according to the Organization for Economic Development.

Other diversified ways to get European exposure when the time is right:

• iShares MSCI EMU Index (EZU): down 24% year-to-date; France, 28.5%; Germany, 25.8%; Spain, 11.9%; Italy, 10.7%
• Vanguard European Stock (VGK): down 19.6% year-to-date; United Kingdom, 30.8%; France, 14.3%; Germany, 12.9%; Switzerland, 10.2%; Spain, 5.9%
• PowerShares FTSE RAFI Europe Portfolio (PEF): down 21.7% year-to-date; United Kingdom, 32.2%; France, 16.4%; Germany, 14.4%; Switzerland, 7.4%

Figures released in mid-August showed that the euro-zone economy shriveled to an annualized rate of 0.8% during the second quarter. It was the biggest reversal since 2001.

Purchasing and manufacturing data are reflecting this slump, consumer confidence is low, and business confidence within the three largest European economies – Germany, France and Italy – is lagging, reports The Economist. Germany’s downturn is causing particular dismay, since it was one of the few countries that sidestepped the global house-price boom.

In general, the sentiment for the global credit crunch is blamed on America. Many Europeans, Germans in particular, feel that they do not deserve this reversal of fortune, as they did not create this situation. But one economist says that Germany profited from the credit-fueled boom and were part of the game.

Elsewhere in Europe, housing mania took hold, but Ireland’s bust might be the most dramatic of all. Its GDP grew 6% in 2007, but is on pace to shrink this year.

Euro inflation fell to 3.8% in August from a record high of 4% in June and July, offering some glimmer of hope.

• Vanguard Europe Pacific ETF (VEA), down 16.8% year-to-date
• BLDRs Europe 100 ADR Index Fund (ADRU), down 17.7% year-to-date
• Vanguard European ETF (VGK), down 17.8% year-to-date
• PowerShares FTSE RAFI Europe Portfolio (PEF), down 20.8% year-to-date
• PowerShares FTSE RAFI Europe Small-Mid Portfolio (PWD), down 21.6% year-to-date