Trading on Jean-Claude Trichet's Eurozone Comments (VGK, EPV)

President of the European Central Bank Jean-Claude Trichet said that much more remains to be done to prevent another financial crisis but that Europe was already halfway through the needed structural reforms. The comments from Trichet came just weeks after Moody's Investors Service downgraded the sovereign debt ratings of Greece, Spain and Portugal. Although each of these country's has already announced structural reforms in order to deal with their fiscal deficits, Moody's wasn't confident that the governments would be able to stick with their announced spending cuts and tax increases. In his recent statements regarding the issue, Jean-Claude Trichet echoed Moody's concerns by noting that eurozone countries now have the proper plans in place to lower their fiscal deficits but that implementation of the announced reforms will be the key to their success. Trichet also said that as regulations are tightened in order to reduce the likelihood of a major European bank failing, there also needs to be more focus on less regulated financial institutions like hedge funds. As regulations and scrutiny of banks increases, investors may be tempted to shift riskier activities to entities such as hedge funds, thus increasing overall systemic risk. There are several options for investors depending on which way they see the market moving. If the eurozone members are successful in their plans and are able to reduce systemic risk to the banking system, while lowering fiscal deficits, the Vanguard MSCI European ETF VGK is an investment option that could see strong gains. However, if the eurozone members give in to pressure to weaken their planned structural reforms, the ProShares UltraShort MSCI Europe ETF EPV is an ETF that may produce solid gains.