With little more than a glance at the global markets on Monday, it was obvious that the announcement from the European Union was huge.

Germany's DAX rose by 5.3%, the U.K.'s FTSE 100 climbed by 5.2%, and France's CAC 40 jumped by almost 10%. Individual stocks in some of the most affected areas reacted even more sharply: National Bank of Greece (NYSE: NBG) tacked on 15%, while Spain's Banco Santander (NYSE: STD) soared by 23%. Even the U.S. markets surged, with the S&P 500 up 4.4% and the Nasdaq higher by 4.8%.

Despite the show of fireworks on the global equity markets, many U.S. investors would probably like to put the whole EU situation in a box labeled "things happening over there" and safely slide it under the bed next to the Ab Roller. Bad idea.

Although there may be some overseas developments that U.S.-focused investors could safely tune out, this isn't one of them, and here are three key reasons why.

1. It is huge
Remember the U.S. TARP program that caused such a hullaballoo? That was announced as a $700 billion backstop. The package that the EU announced is darn close to $1 trillion. That's 12 zeros, in case you're wondering.

The size was a necessity because of both the magnitude of the problem that the EU is facing, and the dilly-dallying that the leaders did while responding to the situation in Greece.

But even if the size was necessary, it's bound to cause major problems. For instance, Germany was on the fence about opening its pockets to struggling EU countries in the first place, and as major global exporter, it's a country that would actually benefit from a weaker euro. And while the situation in Germany may look rock solid compared to that of Greece, the German economy contracted by 5% last year, and recent local elections suggest that the German people would prefer that the government keep its focus on Deutschland. In other words, it's hard to count Germany as a solid partner of the over-indebted countries.

Meanwhile, as part of the massive bailout effort, the European Central Bank has pledged to start buying up sovereign debt to help ease the debt crisis. If this sounds familiar to Americans, it's because it is -- the Federal Reserve did something very similar during our meltdown. But since the ECB is supposed to be independent, the fact that it's participating in this rescue orgy could raise questions.

All of this is to say that the size and scope of this bailout makes it a major make-or-break moment for the EU's very existence. Handled well, this could bring the group to a new level of cohesion that most observers didn't believe the union had before now. If it gets botched, on the other hand, there seems to be a significant risk that the European Union could end up an uncomfortable memory.

2. It may not work
Twelve zeros or not, there seems good reason to believe that the bailout won't work.

The rioting in Greece suggests that the folks in that country are none too happy about the austerity measures that have been foisted on them to get the country's budget back in line. And considering the state of the country's finances, it seems like even more draconian measures may be needed.

Although Greece has been the focus, the issues with other EU countries are nothing to sneeze at. Spain, for instance, had a budget deficit last year of 11.2% of GDP, and that's with more than 18% unemployment. Meanwhile, on a percentage-of-GDP basis, Italy has a higher debt load than Greece along with a 5.3% budget deficit.

For this $1 trillion show of force to not end up signifying nothing, the countries that are doing the financial floundering need to make significant budgetary changes. And although this would be a difficult task for anyone, it happens to fall to politicians, who may balk at the suicide mission that's in front of them.

3. Surprise! You have European exposure
Just because you don't have National Bank of Greece or Banco Santander in your portfolio, that doesn't give you license to get complacent. Many U.S.-based companies with global businesses count on Europe for a significant portion of their sales.



European Sales (% of Total)

McDonald's (NYSE: MCD)

Fast food


Johnson & Johnson (NYSE: JNJ)

Health care products


General Electric (NYSE: GE)

Industrial goods


United Technologies (NYSE: UTX)

Elevators, escalators, HVAC, security, and aerospace


Intel (Nasdaq: INTC)



Source: Capital IQ, a division of Standard & Poor's.

Turmoil in Europe, whether it happens now, or is postponed thanks to the bailout, would probably hit these companies where it hurts.

Of course, not all of the companies would see a similar impact. GE, United Technologies, and Intel, for instance, are all more reliant on positive economic momentum to drive sales, since they count on business and capital spending. McDonald's and J&J, on the other hand, may hold up better because demand for their products is a little more inelastic.

However, what would affect all of these companies is a weaker euro. If the euro weakens -- which, because of the size of the bailout, may happen whether or not the bailout works -- all of these companies will suddenly see the money they earn in Europe translate into fewer dollars when they bring the money back home.

Know thy portfolio, Fool
The key to navigating the situation in Europe isn't to panic and avoid anything that has European exposure. Instead, it's knowing where you're exposed and how downside scenarios in Europe would impact those investments.

At the same time, with skepticism swirling around European investments, there may be opportunities hiding out. As my fellow Fool Alex Dumortier recently pointed out, Telefonica, which has significant Latin American exposure, and Royal Dutch Shell are European companies that could be prime for the picking.

Europe may not be the preferred international investment destination right now, but that doesn't mean you shouldn't venture outside America.