Yes, you can make money in Europe. Hereâ��s� how.

FORTUNE -- Henry Kissinger famously said -- or maybe didn't say, according to people who claim toknow -- "Who do I call if I want to call Europe?"

The comment referred to the disorganized entity known as Europe. Decades later, the EU has 27members, while the currency club -- "union" would be too strong a word -- known as the Eurozonehas 17 members with a common currency, a single central bank... and seventeen different economicpolicies. That's not seventeen different economic policies -- it's 17 different nations, each of whichis internally arguing over what their economic policy should be, to say nothing of what happenswhen all seventeen sit down together at the same table.

The Eurozone history indicates there will not be any startling changes that will all of a suddenharmonize policy across the membership. That would require a common willingness to makesacrifices, and the monetary "union," as it insists on calling itself, remains beset by multi-lingualfinger-pointing where the rich nations (read: Germany) blame economic weakness on the profligatehabits of poorer nations; meanwhile the poor nations blame the rich (again, Germany) for beingstingy.

The Eurozone policy debate remains a major stumbling block to making any economic progress. Theinability of the members to reach consensus continues to drag on, all the moreso when manymembers feel badly handled by their more flush fellows.

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One negative outcome of this logjam has been an inability to effectively confront inflation -- ordeflation -- both of which periodically threaten to break through ECB target levels.

And in general, economic policy is sclerotic. Like a wounded limb, the Eurozone will only heal whenhealthy fresh blood pumps freely through the affected parts, and under the present politicalstalemate, that is simply not happening. The "periphery" -- the weaker economies more likely to needbailouts -- can not heal before the core economies, principally Germany. Eurozone output hasdeclined for 6 consecutive quarters, and the ECB and the IMF have both revised their outlookdownward. But these new forecasts may not be pessimistic enough, in which case the Eurozone'sGDP could remain weak for a protracted period.

Unemployment should remain staggeringly high, with the very real risk of a "lost generation." Theeasy jobs in construction and unskilled manual labor (remember the "Polish plumber"?) vanishedwith the evaporation of easy credit and the real estate implosion. Administrative jobs have beendrastically reduced through austerity, and cross-border labor migration suffers from quotas, andlinguistic barriers and cultural difference that can pose real problems. Germany, for example, has alongstanding cultural tradition of robust training in the trades. Workers from other countries whowere not raised in this environment don't do well in the apprenticeship system that has been sosuccessful in Germany. The disdain for skilled manual labor felt by youths from other cultures hasproven to be a stumbling block to employment immigration.

We hasten to point out that large numbers of unemployed young people also becomes a recipe for

major social unrest in the longer term. The discontent that sparked such movements as the ArabSpring, Spain's "Indignados" (credited as the impetus for Occupy Wall Street) -- and that is nowbubbling over in Istanbul -- can easily provide the spark for a generation sullen over the failures oftheir elders.

High debt levels and deficits will persist, and the lack of availability of credit will hamper small andmid-sized business growth for a very long time to come. Since most new jobs are created by start-upsmall and mid-sized businesses, the employment and business formation end of this dreary cyclelooks set to continue.

"Super" Mario?

Eurozone central banker Mario Draghi has had a certain degree of success "jawboning" the markets.One might say that, compared to his U.S. counterpart Ben Bernanke, his record is astounding.

Like Bernanke, Draghi has increased the flow of cash into his system. And like the U.S., theincreased liquidity has not translated into massive new lending. But Draghi remains with an ace uphis sleeve, in the form of a massive quantitative easing program called the "Outright MonetaryTransactions" bond-buying program (OMT). Just this week Draghi called the OMT "the mostsuccessful monetary policy measure" of recent times. Last week he boasted that the OMT has madethe Eurozone "a more stable and resilient place" by removing "unwarranted fears of a systemiccollapse" of the monetary union.

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The truly impressive bit about the OMT is that it has never been used. In fact, this week a German ishearing arguments on whether the OMT would violate the German constitution. We expect theapproval to be forthcoming -- probably in September or October. But the mere fact of Draghiannouncing the OMT in September 2012 was enough to pop European markets -- bond yieldsretreated, and most European equity markets rose, with the effect that the "fear trade" no longerdominates.

There remains some way to go before stability returns to the Euro area. Central bankers have notbeen helpful, saying little or nothing to give a sense of direction to the markets. Rate manipulation isof limited effect -- risk spreads on European credit default swaps are down, but there's not enoughoomph in a negative return on consumer savings accounts to drive to a full recovery.

In the absence of anything resembling policy agreement across the Eurozone, Draghi looks to retainhis ability to lift the markets by occasionally referring to the - as yet untried - OMT.

In The Great Dictator, Charlie Chaplin mocked (among other things) notions of austerity, particularlyas it relates to a Greater Cause. With the bloom fading from the Great Cause that was Europeanunity, austerity is becoming less popular with ruling politicians. European Commission presidentJose Manuel Barroso recently said austerity policies have reached their limits of both social andpolitical acceptance. Translation: if we push one more inch, they'll vote us out.

This may lead to more moderate policies -- the German finance minister is already muttering thatFrance and Spain may be granted "certain flexibility" in meeting deficit targets.

The move against austerity is becoming a tailwind, as planners start prognosticating a very gradualrecovery, export growth caused by growing foreign demand, and a willingness to promote

government-bolstered private-sector investment.

Opportunities by Region

Germany: It is all too rarely acknowledged that, so far, the Common Market and its descendants --including the EC and the Eurozone -- have accomplished their primary objective, which was toremove incentives for France and Germany to go to war with each other. With the ascent of Frenchpresident Hollande the détente is nowhere near so close as during the days of "Merk-ozy."Nonetheless, the two nations combine to represent half the Eurozone's economic output, and theirjoint -- or conflicting -- interests should continue to dominate the sclerotic policy scene.

We see this as a net positive for Germany, where we are bullish. German culture is work-oriented --French youths turn up their noses at the notion of becoming apprentices to German machine-shopoperators, with the consequence that more Germans have jobs, while more Frenchmen continue tofeel superior.

Germany's export economy benefits from current weakness in the Euro, and it has one of the lowestunemployment rates in the Euro area.

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Germany is a particularly bright spot, and one of the few countries where expectations are on therise. It will remain the European "safe haven." If, as we strongly anticipate, Angela Merkel is re-elected this fall and if, as we strongly anticipate, the German court gives the go-ahead for the OMT,Germany should continue very much in the ascendant.

Investment idea: Long Germany through iShares Germany EWG  and Short Germangovernment bonds through PowerShares DB German Bund Futures BUNL .

France: We are bearish on France, where President Hollande appears decidedly anti-business. Hecurrently enjoys a mere 24% approval rating -- the country slid back into recession in the firstquarter and only 5% of the French think things will improve. "Fifty million Frenchmen can't bewrong," they say. We agree with their dour outlook and would be short this economy. C'est la vie.

Investment idea: Short France through iShares France EWQ

Britain:Â The first economy to impose austerity, we think the UK will be the first to emerge. Bullishelements -- aside from an actual pick-up in growth in the first quarter -- include new central bankerMark Carney, who has expressed his desire for greater transparency, and the pro-business stance ofthe Cameron government. Its distance from the Eurozone -- both political and monetary -- give itgreat flexibility, and its import-heavy economy stands to benefit as the prices of commoditiescontinue to deteriorate.

Recent increases in retail sales figures and industrial production, together with a dip in the savingsrate, signal greater bullishness -- or should we say "John Bullishness"? -- in the UK, and the housingmarket has turned up as well.

Investment idea: Long the UK through iShares United Kingdom EWU .Â

The periphery:Â It can't be nice being called "the Periphery." Just ask Portugal, Spain and Italy.

Broad risks remain in these countries, one hold-up to the ECB launching new policy initiatives.These governments may prove incapable of honoring commitments to Brussels under the variety ofausterity and bail-out packages they have taken on. Incurable mass unemployment may lead tosevere social unrest -- half of Italian youth are ready to leave the country to look for a better life. Andsovereign bank risk is not out of the question -- Spain's bank system remains opaque even aftersignificant high-profile corruption cases that even touched the prime minister.

At the other end of the periphery, Slovenia looks like a relatively stable newcomer -- its risks appearself-contained, and if it does need assistance, it is likely to be small and highly manageable. Slovenia,in short, is not Cyprus.

Indeed, even Cyprus is no longer Cyprus. The risk of another Cyprus-style crisis is minimal. Cyprushas confirmed that, once it gets in, no one wants to leave the Eurozone - and for all its complainingand chastising of weaker members, Germany can't afford to have anyone flee the currency union.

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On the negative side, these countries suffer from dreadful sentiment, crushing youth unemployment,and broad economic underperformance. Their governments range from unappealing to unstable.Still, Hedgeye's Macro readings have not yet flashed a definite Long or Short signal. We don't ruleout the possibility that negative trends in the Periphery could stabilize. If Germany recovers fastenough -- and if France doesn't lose more ground -- there could be a positive contagion effect.

Investment ideas: For Spain, we would use the iShares Spain EWP ; for Italy, the iShares Italy EWI . It's too soon to call a Short or Long in these markets. We continue to monitor these economiesto see which way the Macro cookie will crumble.

Portugal

To everyone's surprise -- and to the relief of many -- Portugal just successfully sold a 10-yeargovernment note issue. This, in a country that was for a time viewed as the basket case of theEurozone.

Portugal still has government debt at around 122% of GDP -- the third-highest in Europe. Its bondissues are still costing it, though not so much as in the past. Coupons are in the 5%-6% range, whichis a meaningful improvement. Portugal will likely want to join the OMT mechanism. While it is tooearly to make a decisive call, the government is showing real initiative, taking steps to cutgovernment spending and still considering austerity measures.

We leave you with this analogy: in 1999 Portugal adopteda national strategy to fight drug addiction. Drug userswere no longer treated criminally, but as clinically sickpersons requiring a range of treatments. While it has byno means "cured" drug use, Portugal's program is widelyconsidered a viable alternative to the War on Drugs. Theexpansion of harm reduction efforts, coupled withaggressive after-care and social reintegration programs,have dramatically reduced the social impact of drugabuse, including HIV infection.

Like widespread drug addiction, the global financial malaise is not going to be "fixed" - notovernight, and maybe not ever. But there are surely more effective ways to contain the addicts andto limit the harm they do to society. After all, where there's a will, there's a way.

We are still waiting for Europe to show some willpower.