By Michael Johnston of ETF Database

NEW YORK ( TheStreet) - For the past several months Europe's largest markets have taken their cues from one of their smallest neighbors, as financial turmoil in Greece regularly made headlines throughout the continent. The potential for a fiscal crisis in one of the bloc's smallest economies highlighted the risks of the common currency system, and set off rounds of fierce debate over the obligations of richer European countries to intervene. Now, it is a completely different disaster from another of Europe's relative unknowns that threatens to undermine a still fragile economic recovery.

Last week, an eruption beneath Iceland's Eyjafjallajokull volcano began spewing ash and dust into the atmosphere, creating a potentially dangerous situation for aircraft flying through the region. The eruption has shot glass shards into the air that could cause major mechanical failures if they were to come in contact with an airplane engine. Taking a cautious approach, regulators ground flights to and from Europe. What was initially expected to be only a temporary closure has now dragged into its fifth day, and airlines estimate that more than 60,000 flights have been canceled.

While the impact on the aviation industry is fairly straightforward -- analysts estimate that daily losses are in the neighborhood of $250 million -- the concern now is that the slowdown will reach into other areas of the European economy.

It is still unclear how long the airline blackout will last and how serious the economic ramifications will be, but the impact is already being felt throughout the world. Kenya's Daily Nation newspaper estimates that the Kenyan economy is losing almost $4 million daily as a result of flight cancellations to Europe. Kenyan farmers are reportedly dumping stocks of food and other goods earmarked for Europe, a scenario that could play out across agriculture-intensive economies in Africa and South America. But the biggest impact will likely be felt in Europe, where tourism has already taken a major hit and other industries could be next to feel the pinch.

Europe ETFs In Focus

The fallout from the recent volcanic eruption adds yet another roadblock on a road to recovery already littered with a dire fiscal situation in Greece, record high unemployment in several major economies, and swelling government debt. In the following pages, we profile three Europe ETFs that could be in focus as all of these situations play out.

Vanguard European ETF ( VGK):

This ETF is the most popular option for gaining broad-based European exposure, investing in nearly 500 stocks listed in more than a dozen countries. If the situation in Europe's airspace isn't quickly resolved, VGK could encounter some turbulence.

ProShares UltraShort Europe ( EPV):

For more active investors looking to capitalize on anticipated weakness in the European economy, EPV may be an interesting play. This ETF seeks daily returns equal to -200% of the daily return on the MSCI Europe Index.

iShares MSCI Spain Index Fund ( EWP):

This ETF tracks the MSCI Spain Index, a benchmark measuring the performance of one of Europe's most troubled economies. The volcanic cloud could actually be a boon to Spain, as Infrastructure Minister Jose Blanco said yesterday that all Spain's airports were now open. The country has offered to let other European nations use Spanish airports as stopovers, giving Spain a leg up on its neighbors.

-- Written by Michael Johnston of ETF Database

Michael Johnston is the senior analyst and founder of ETF Database, a Web-based investment resource providing actionable ETF investment ideas and an ETF Screener for investors analyzing potential ETF investments. Johnston oversees ETF Database's free ETF Newsletter, one of the most popular sources for news and commentary focusing exclusively on the exchange-traded fund industry. Johnston also maintains and develops content for ETFdb Pro, a line of analyst reports and model portfolios designed to help investors utilize ETFs to meet their investment goals.

Johnston has completed the Chartered Financial Analyst (CFA) program, and obtained his bachelor's degree in finance from the University of Notre Dame. Prior to founding ETF Database, Michael worked in a private client service group performing valuations of companies operating in a wide range of industries.

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