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NEW YORK ( TheStreet) -- The situation in Europe may be difficult but that doesn't mean it can't be solved, Jim Cramer told "Mad Money" viewers Tuesday. Cramer said that while the odds of a favorable resolution in Europe are about even, the markets could see a 10% pop if the best-case scenario does happen.
But what is the best-case scenario? Europeans need to create the equivalent of the U.S.'s Federal Deposit Insurance Corporation, an organization that can insure all European banks, in euros, so citizens don't have to flee their home country's banks for what they perceive as safer investments.Cramer said with this one simple move, a "virtuous circle" would be created. The increased certainty in Europe would likely spur the Chinese to offer stimulus for their country, he said, which would, in turn, boost the confidence of international companies to invest and expand. From there, hiring would increase, the pressure would be off the U.S. banks and earnings would no longer be in danger. Without such a deal, however, Cramer expects to see a wave of earnings pre-announcements and cuts in the second half of the year. He said the Germans, who appear to be holding all of the cards in this game of international poker, don't seem to think it's in their best interest to prop up the poorer European countries, but Cramer hoped that attitude will change. If the best-case scenario happens, he continued, investors should look to buy international growth stocks, names like Starbucks (SBUX) and McDonald's (MCD). He would also look at companies like Ralph Lauren (RL) and the automakers such as Ford (F). But until the best-case scenario happens, Cramer cautioned, investors need to "stay the course" and remain defensive.