The recent events in Greece remind us that Europe can still be a scary place for investors. Although the debt standoff with Greece ended fairly amicably, periodic market scares will likely re-emerge.

Even as the Greek drama was unfolding, market strategists implored investors to stay focused on the bigger picture. Because beyond that country’s borders, the economic clouds hovering over Europe are beginning to part. And that spells opportunity.

The Trillion Euro QE
Desperate times have indeed called for desperate measures. Faced with a prolonged economic stagnation across Europe, the European Central Bank finally began its own version of central bank bond buying earlier this year. And as if on cue, “green shoots” are starting to appear on the European landscape.

It’s too soon to declare victory, but Europe is clearly seeing the first stages of an economic upturn. In recent months, investors have taken note of a rebound in retail sales and purchasing manager sentiment, highlighting bullishness among consumers and businesses alike. Economists now expect that euro zone economies will collectively grow around 1.5% this year, and close to 2.0% in 2016.

That may not sound very impressive, until you realize that the euro zone has been flirting with recession ever since the financial crisis of 2008. The talk of a “lost decade” and a “lost generation” of unemployed youth has been replaced by hopes of a potentially virtuous economic cycle where strengthening demand begets yet more strength.

Europe now has clear tailwinds in place for a sustained upturn to take root. “The drop in oil prices, interest rates and the euro will all have an impact on the economy,” says Marc Chandler, global head of currency strategy at Brown Brothers Harriman and author of the blog.

Those factors should increasingly come into play now that Europe has proved its ability to handle the crisis in Greece without any major fallout. “Greece has been ring-fenced,” says David Kotok, chief investment officer at Cumberland Advisors, adding, “It’s the Rhode Island of Europe, and in any event, a ‘Grexit’ wouldn’t have derailed the rest of Europe.”

With Europe charting a brighter course, a key question emerges: What kind of opportunities will emerge for investors seeking exposure to the rebound?

Draghi’s Foresight
While ECB president Mario Draghi is garnering praise for his support of vast bond-buying efforts, it was his 2011 push to clean up European banks that may have provided the real impetus for growth. A series of capital injections and much-needed stress tests have led to today’s more favorable lending environment in Europe.

“The European banks are in much better shape than they were a few years ago; they’re better regulated and stronger financially,” says Russ Koesterich, BlackRock’s global chief investment strategist. He adds, “The credit channels are beginning to thaw out for both consumers and businesses.”

Koesterich, along with other strategists, believes that European banks now hold great appeal for investors. Yet it’s hard to identify a suitable exchange-traded fund for this sector. The iShares MSCI Europe Financials ETF (EUFN), for example, has roughly 50% portfolio exposure to the U.K. and Switzerland, neither one of which is in the euro zone. Investors can go the single stock route with banks such as Deutsche Bank.

Although all member states are benefiting from a drop in the currency’s value, each nation has a unique set of opportunities and challenges. As a result, a country-specific focus may be the better path.

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