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How to Invest Around the European Crisis

Updated to add comment about Bankia.

NEW YORK ( TheStreet) -- As we enter the seasonally weak part of the year for the stock market, the European crisis, which U.S. investors have no control over, will play a big role in the direction of companies listed here at home.

BlackRock's Investment Institute sees Europe's debt woes as both a short-term and long-term crisis. "Today's is all about funding while tomorrow's is about structural reform, finding the right mix of spending cuts and growth, and -- most difficult of all -- giving up sovereignty."

The next big event in the Eurozone will be the Greek elections slated for June 17. It will provide an indication to the world how likely the country is to default on its debt, depending on which party wins. As of now, feelings seem to be mixed on who will win, but a recent poll in the Wall Street Journal shows the New Democracy (conservative) party in the lead. They are closely trailed by the Syriza party, which suggests Athens can default and still remain in the euro.

There is certainly a game of chicken developing in Europe. As Jim Cramer said in a recent post on Real Money: "On the one hand, we have the adamant Germans who are not going to give an inch on the purse strings of Europe that they clearly control. On the other hand, there's every other country in the European Union that now thinks, because of the troubles in Spain and Italy, not just Greece, that bonds must be printed and money spent to grow the economies on the Continent, not just Germany."

In a white paper titled "Europe on a Tightrope," BlackRock's Investment Institute says European leaders have proven they will only step up to the plate under extreme duress. "Investors have noticed they have a much higher pain threshold than their U.S., UK or Japanese counterparts. Markets have to fall off a cliff before policymakers jump in to clean up the mess. This summer is unlikely to be any different."

They continue to point out that "right or wrong, one thing is crystal clear: Investors cannot count on certainty."

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