How To Trade the EU's Reform Plan (VGK, UPV, EPV)

Eurozone leaders may be close to reaching an agreement on joint measures that member countries will take with the aim of increasing the the Eurozone's competitiveness and protecting the euro.

The list of measures under consideration include reducing labor taxes, linking retirement age to life expectancy and moving towards a common corporate tax base. However, countries like Ireland that already enjoy a competitive advantage by offering lower than average corporate tax rates might resist the idea of minimum corporate tax rates.

The EU leaders are also likely to put more pressure on the government of Portugal to announce structural reforms in a bid to boost the market's confidence that Portugal won't find itself in need of a bailout from the European Union and the International Monetary Fund like Greece and Ireland did last year.

Although Portugal has been saying for some time that it will not need a bailout, the market has shown little confidence in the country's finances and concerns are growing that the governments of countries like Greece, Portugal and Spain will continue to be under increasing financial pressure.

Even when these countries have taken steps to reform their finances, which have typically included raising taxes and cutting spending, internal forces have resisted them. For instance, Greece saw deadly riots last year in response to its proposed reforms and Spain's federal government has little control over the spending habits of its autonomous regions.

The market was further rattled this week when Moody's Investors Service downgraded Greece's debt rating three levels from Ba1 down to B1 on Monday, followed later in the week by Moody's downgrade of Spain's debt rating one level from Aa1 down to Aa2. The growing fear is that the downgrades are part of a trend, which many believe will lead to Portugal being the next country to seek a bailout.

Investors who feel that the Eurozone leaders plan has a fair chance of succeeding and increasing European competitiveness should take a look at the Vanguard MSCI European ETF VGK. The ETF seeks to track the performance of a benchmark index that measures the investment return of stocks issued by companies located in the major markets of Europe.

Investors who think the plan has a very good chance of succeeding might consider the ProShares Ultra MSCI Europe UPV, which seeks daily investment results, before fees and expenses, that correspond to twice the daily performance of the MSCI Europe Index.

On the other hand, investors who see further trouble ahead for European economies may want to consider the ProShares UltraShort MSCI Europe ETF EPV, which seeks daily investment results, before fees and expenses, that correspond to twice the inverse of the daily performance of the MSCI Europe Index.