European finance ministers eased the terms on emergency aid for Greece, declaring after three years of false starts that Europe has found the formula for nursing the debt stricken country back to health.

Greece has about 60 billion euros of restructured bonds outstanding, handed to investors taking part in the debt exchange.

Euro area finance ministers sold the accord, blessed by the International Monetary Fund and European Central Bank, as a milestone in fighting the debt crisis, much as the first two Greek loan packages were once touted as solutions.

The French bank will inject more funds into Emporiki, bringing the total capital boost since July to 2.85 billion euros, and buy 150 million euros of convertible bonds issued by Alpha Bank.

N) as deal manager, a senior finance ministry official told Reuters earlier on Wednesday.

But private sector analysts have raised questions over whether it would attract enough interest from bondholders to deliver the promised savings and how it would be funded.

Greek bank stocks have plunged by more than 15 percent since the plan was announced on Tuesday, on concerns they will be forced into a raw deal that would hurt their capital.

Banks wrote down their Greek government debt holdings by about 100 billion euros as part of the world’s biggest sovereign restructuring agreed in March.

Since then, the unit has been unprofitable every year except 2007, with accumulated losses for the French lender of about 5.7 billion euros through the end of June.

If they fail to attract private investors to provide about a tenth of the capital they need, they will be nationalized.

Greek efforts to ease indebtednessby repurchasing its own bonds at less than their face valuedepend on investors accepting below market prices rather thanholding out for an improved offer.

The EU and the IMF have said that they would not disburse the aid promised to Greece before reviewing the buy back’s results.

French banks, the biggest foreign holders of private and public debt in the troubled economies of Greece, Ireland, Italy, Portugal and Spain, are benefiting from the ECB’s moves as the crisis enters its fourth year.

Officials have said that the repurchase has a target cost of around 35 cents on the euro.

A repurchase at that price is seen as a golden investment opportunity for hedge funds which have bought Greek bonds at rock bottom prices.

A Greek finance ministry official said that hedge funds might hold as much as 25 billion euro of Greek bonds bought at very low prices.

The disbursement of 9.3 billion euros in the first quarter of 2013, for example, is tied to experts from the European Union, ECB and IMF certifying that the Greek government met a January deadline for carrying out a tax reform.

Stournaras made clear Greece has a tough road ahead to implement its pledges to lenders and secure funds.

PARIS/LONDON (Reuters) – Far from fearing the coming investment from Europe’s telecom giants into superfast broadband, smaller cable firms believe they will still beat the big guns to the trigger.

Deutsche Telekom, which has made slow progress rollingout fiber optic cables to customers, is betting it can trimexpenses and boost its position versus cable operators such asKabel Deutschland Holding AG (KD8) by speeding up old copper lines.

Their cable lines, designed to deliver TV to homes, have been upgraded to carry voice calls and Internet at speeds often five times faster than competing services from the telcos.

FM radio programming, high speed Internet, telephone service, and similar non television services may also be provided through these cables.

Now telecoms groups such as Deutsche Telekom and KPN have to play catch up.

But after a third year of falling revenue, their stretched balance sheets will struggle to find the hundreds of billions of euros they need over the next decade to connect European homes to fiber broadband, which can deliver speeds of 30 100 megabits per second.

A decade ago, under former Chief Executive Officer Kai Uwe Ricke, DeutscheTelekom wrote down the value of the US business and itsmobile phone licenses by 18 billion euros in the third quarter,leading to the biggest full year loss in Europe’s corporatehistory at the time.

Unlike the cable companies, the telecoms providers, many of the former national monopolies, have been saddled with tight regulation of their tariffs and legacy business in terminal decline.

Fixed telephone revenue fell 8.3 percent last year as more people got rid of home lines, while mobile revenue fell 0.6 percent as data sales failed to make up for lower voice prices, according to telco lobby ETNO.

With dwindling cash flows and high debt, they are already struggling to keep up the high dividends that have been their single biggest attraction to investors.

European phone companies face a challenge in balancing theneed to invest for years to develop fast networks against theneed to woo investors with attractive dividends and sharebuybacks.

Some, like Spain’s Telefonica, have been selling assets and cutting their payouts to shareholders.

The homemarket accounted for 44 percent of Deutsche Telekom’s netrevenue of 43.5 billion euros ($56.1 billion) in the first ninemonths of this year.

The net loss was 6.9 billion euros, or 1.61 euros a share,compared with a profit of 1.07 billion euros, or 25 cents, ayear earlier, Deutsche Telekom said today.

Industry executives and analysts say that once telcos build out fiber they will have to price it more expensively to recoup their investments, while splashing out on advertising that convinces customers of ‘the need for speed’.

In an industry where price deflation has been the norm, that would play into the hands of the cable operators by raising the profile of a service they already offer more cheaply.

Cablevision also offers high speed Internet connections , as well as digital cable , and VoIP phone service through its Optimum brand name.

“The opportunity that we have is pricing power,” said Charlie Bracken, the co finance officer of Liberty Global at a recent investor conference.

And we think there’s a real opportunity now to see that turn around.

INVESTOR FAVOURBruno Grandsard, a portfolio manager at Axa Investment Management, says investors are likely to prefer cable stocks to telcos for quite some time.

“Cable in Europe has a window now where it will reap the benefits of network upgrades and rationalization of the sector.”.

Operationally, it’s a no brainer that there is still five years of growth ahead in Germany, and decent but slower growth in the Netherlands, Belgium and Britain,” said Grandsard.”.

At the same time, the big telcos are entering into a multi year investment phase, even as their core sales and profits are coming down.

The Forex Market” All Rights Reserved.. Deutsche Telekom AG (DTE) reportedoperating profit and sales that topped analysts’ estimates,while a 7.4 billion euro ($9.4 billion) writedown on its T Mobile USA unit sank the German former phone monopoly into itsbiggest quarterly net loss in a decade.. Adjusted earnings before interest, taxes, depreciation andamortization slipped 2.6 percent to 4.78 billion euros, beatingthe 4.69 billion euro average estimate compiled by Bloomberg, asthe Bonn based company slowed a decline in revenue in Europeanmarkets such as Germany and Hungary. While T Mobile USAcontinued to lose contract customers, prepaid cards helped thebusiness exceed profit estimates.. Chief Executive Officer Rene Obermann is trying to halt adecline in voice call revenue and speed up services like mobilepayments and music streaming. His efforts to damp the impact ofthe debt crisis in Europe through cost reductions may bestarting to pay off, while US profit may help his move tonarrow T Mobile USA’s gap with larger carriers after lastmonth’s agreement to merge with MetroPCS Communications Inc. (PCS). “They are actively tackling the US, and while Europe isvery macro driven, the company is managing the situation well,”said Ulrich Rathe, an analyst at Jefferies International Ltdwho recommends holding Deutsche Telekom shares. “Taking theUS writedown is the right thing to do even if it hurts.

Broadband speed really is the killer app,” said Liberty’s Bracken, adding that the group only saw real competition when telcos built fiber to the home that could match cable’s speeds, such as in the Netherlands.Niek Jan van Damme, who heads Deutsche Telekom’s German business, admitted that the group was struggling with cable competition. To cope, it plans to upgrade its old copper network with so called VDSL technology to boost speeds to 50 Mbit/s, while slowly rolling out fiber capable of 200 Mbit/s in the next decade.”.

Of course it has frustrated us that the cable companies have been snatching market share from us,” said Van Damme.”.

NEW YORK (Reuters) – The S&P 500 fell for a fifth straight trading day on Wednesday as protests in Spain and Greece over euro zone austerity measures raised fresh concerns over Europe’s ability to get its debt crisis under control.

ATHENSGreek Prime Minister Antonis Samaras is undergoing one of the biggest metamorphoses of his long political life: from shrill opponent of Europe’s rescue plan for Greece, to the man the Continent’s leaders now see as the best bet for keeping the country in the euro zone.

“The key is liquidity. That is why the next credit tranche is so important for us,” Samaras told the German business daily Handelsblatt.

A German government spokesman said Merkel would travel to Athens on Tuesday for her first visit since the crisis began in late 2009, when a previous government revealed that Greece had hugely understated its public deficit.

“It is a trip that of course happens to the backdrop of this very difficult situation that Greece is going through right now, the massive adjustment and reform measures that have shaped Greece for the past two years,” Merkel’s spokesman Steffen Seibert told a news conference.

The visit appears to signal that Europe’s most powerful leader has decided it is essential to keep Greece in the single currency area despite is repeated failure to meet fiscal targets and economic reform commitments under two bailout programs.

“This is symbolically very important. It points clearly to the fact that Merkel is not going to drop Greece, even though things are not going well there,” said Carsten Brzeski, senior European economist at ING bank.

Merkel has been vilified in some Greek media as dictating devastating austerity to Greece.

Germany’s popular press meanwhile has systematically depicted the Greeks as work shy tax cheats.

Greek government spokesman Simos Kedikoglou said in a statement: “It’s the first time in five years that the German Chancellor visits Greece.

Will certainly be a further, important step toward future European decisions.

Important institutions of the EU include the European Commission, the Council of the European Union, the European Council, the Court of Justice of the European Union, and the European Central Bank.

NEW YORK (Reuters) – US manufacturing suffered its weakest quarter in three years and conditions at European businesses worsened, surveys showed on Thursday, while China’s economy continued to lose momentum.

The data shed more light on the difficult task facing global policymakers, particularly in Europe and the United States, who have tried to boost growth with aggressive monetary stimulus.

European stocks remained weaker and the euro depreciated against the dollar on Thursday as fresh data compounded concern about global growth, while yields on the debt of fiscally strained euro zone nations were stable after a Spanish government bond sale exceeded targets.

The US manufacturing sector closed out its worst three months since the third quarter of 2009 in September, according to financial information firm Markit.

Export orders fell for a fourth month running as demand from Europe and Asia faded, with September’s slide the steepest in nearly a year.

“Manufacturing isn’t looking good,” said David Sloan, economist at 4Cast Ltd in New York, adding that “the global situation is a restraint on the US economy.”.

Growth in Asia, and China in particular, is slowing down, so US growth is going to have to be domestically generated.

A separate report showed factory activity in the US mid Atlantic region shrank for the fifth month in a row in September, though the rate of contraction was not as severe as in prior months.

The fall in the PMI is another reminder that the ECB’s new asset purchase program is not an answer to all of the region’s problems,” said Ben May, European economist at Capital Economics, in a research note. “The euro zone recession looks set to deepen in the latter part of the year.

A preliminary euro zone purchasing managers’ index, or PMI, for the euro zone fell to its lowest level since June 2009.

“MORE STIMULUS EXPECTED IN CHINA, EUROPEExport driven Asian economies struggled also again in September.The China HSBC manufacturing PMI inched up in September to 47.8 from August’s nine month low of 47.6, suggesting the world’s second largest economy remains on track for a seventh quarter of slowing annual growth.”.

In order to convert hopes into reality and avoid an outright hard landing, the Chinese authorities have to step up again their accommodative efforts on both the fiscal and the monetary side,” said Nikolaus Keis, economist at UniCredit.China’s economic slowdown is expected to reach its nadir this quarter, with a recovery of momentum delayed until the final quarter, leaving growth for 2012 likely to fall below 8 percent, a level last seen in 1999, a Reuters poll showed last week. <ECILT/CN>European Union and Chinese leaders are meeting in Brussels on Thursday leaders to try to bridge growing differences over trade and find common ground on tackling Europe’s debt crisis.European manufacturers performed slightly better than economists had hoped this month, while the downturn in Germany, the euro zone’s largest economy, also eased a bit.”.

LONDONConstruction across the euro zone continued to decline in July, indicating the single currency area will likely struggle to post economic growth in the third quarter of this year, data showed Wednesday.

We’re not altogether hopeful about that,” said Markit chief economist Chris Williamson.However, trouble for French factories and service oriented businesses increased at a faster pace than expected.Altogether, the surveys bolstered expectations that the ECB will cut its main interest rate in October to a new record low.”.

The comments raised already high hopes for the ECB policy meeting on Thursday, where markets expect Mr Draghi to provide more details on how he will bring down the funding costs of euro zone countries like Greece and Portugal.

In Europe, attention turned to the European Central Bank’s policy meeting on Thursday, with investors hoping to get details on a much anticipated bond buying program.

“The only question is whether or not it will print more money between now and November,” said Nicholas Smith, equity strategist at CLSA in Tokyo.

The dollar gained back some ground against the yen Tuesday, at 78.34 compared to 78.26 late on Monday.

Although the dollar pushed back during the session, the Nikkei was off 0.4%, weighed by the strength of the local currency.

Index heavyweights Softbank and Kyocera were down 3.0% and 0.6% respectively, offsetting companies with a European exposure, which were helped by the stronger eurosuch as Canon, which added 0.2%.

Australia’s S&P ASX 200 was off 0.7%, amid weakness in banking stocks that was offset by gains in the mining sector, ahead of the Reserve Bank of Australia’s policy meeting later in the day.

Reserve Bank of Australia Governor Glenn Stevens said today in an opening statement to House of Representatives Standing Committee on Economics that the ongoing mining boom will likely see its peak within the next year or two and the central bank is prepared to respond to significant deviations from this central forecast.

Although a cut in interest rates is not expected, the local market could get a boost if the central bank acknowledges the recent weak economic data from China.

With US markets closed for the Labor Day public holiday Monday, the focus was on Europe, where European Central Bank President Mario Draghi said that the central bank was open to buying government bonds with maturities of three years or less.

Monday, HSBC’s China Purchasing Managers’ Index fell to its lowest level since March 2009, while China’s official manufacturing PMI, released on Saturday, slumped to a nine month low and was below 50 for the first time since November.

Before Monday, Tingyi was down more than 18percent on the year but is now down 6.8 percent, compared to the8.9 percent gain on the Hang Seng Index.

South Korea’s Kospi was 0.2% lower, with index heavyweight Samsung Electronics flat.

Elsewhere in Asia, Seoul’s Kospi index shed 0.1 percent to 1,904.62 and Sydney’s ASX/S&P 200 was marginally lower at 4,314.80.

Investors were also hoping for easing measures in the US, after Federal Reserve Chairman Ben Bernanke on Friday said he would be ready to push the button for further quantitative easing if needed.

In company news, Sharp shares bounced up 10.2% in Tokyo, after falling 19% over the last three sessions, after a media report in Taiwan said that Hon Hai Precision Industry’s chairman Terry Gou said he was definitely going to get involved in the management of Sharp.

Of China, also known as Chalco, and SouthGobi Resources moved in Hong Kong on news that the Chinese metals giant had ended its bid to acquire the Mongolia focused coal miner.

After the transfer of sovereignty of Hong Kong from the United Kingdom in 1997, and Macau from Portugal in 1999, these two special administrative regions have continued to have their own teams, which play as “Hong Kong, China” and “Macau, China”, respectively.

MADRID – Spain’s northeastern region of Catalonia said Tuesday it will seek (EURO)5.02 billion ($6.29 billion) in rescue aid from a central government fund, underscoring the extent to which even the country’s more powerful centers of industry and business are unable to manage their debts.

Catalonia, which has Barcelona as its capital, became the third region after Valencia and Murcia to officially solicit aid.

Valencia said it will seek (EURO)3.5 billion and Murcia is to ask for up to (EURO)300 million.

Many of the 17 semi autonomous regions are struggling with the recession, the country’s second in three years, following a real estate crash in 2008 that has pushed the unemployment rate to near 25 percent.

Because the regions are unable to borrow on financial markets to repay their huge debts, they are being forced to impose severe cutbacks.

Spain’s regions have a combined debt of (EURO)145 billion and some (EURO)36 billion must be refinanced this year.

Italy sold 3 billion euros of zero coupon 2014 debt toyield 3.064 percent, down from 4.86 percent at the previousauction on July 26.

The new fund set up to bail out struggling euro zone economies may face a 150 billion euro ($189 billion) shortfall if Spain and Italy need a full bailout program before the end of 2014, according to analysts at Credit Suisse.

The debt burden of Spain’s 17 regional governments is a focus of market fears that the nation could be forced to seek a sovereign bailout, on top of a 100 billion euro rescue loan for its banking sector.

Prime Minister Mariano Rajoy is due to host European Union President Herman Van Rompuy today for the first in a series of meetings aimed at solving the nation’s funding issues.

Both politicians reiterated the need to move faster toward creating a European banking union that would be able to manage bank failures, lowering the financial risk to individual countries’ public finances.

“Progress on banking unity is particularly urgent,” said van Rompuy, who broke off from his holidays in Spain to meet Rajoy.

Spain’s Prime Minister Mariano Rajoy is hosting European UnionPresident Herman Van Rompuy for the first in a series ofmeetings aimed at helping the nation fulfill its funding needs.

Van Rompuy said the EU was aware of the great efforts in reforms and austerity measures that Spain was making to fulfill its deficit curbing obligations and said its European partners were agreed on helping the country.

Rajoy is to meet French President Francois Hollande on Thursday and German Chancellor Angela Merkel on Sept.

Spain has already been granted a loan of up to (EURO)100 billion by its 16 eurozone partners to help rescue its banks.

The region’sequities pared losses as European Union President Herman VanRompuy said Greece’s future is in the euro and the region’srescue fund is ready for rapid action to aid Spanish banks.

Because of the financial problems of the regions and banks, Spain’s economy has never quite recovered from a property sector collapse in 2007 and new data released Tuesday showed its recession is deeper than previously thought.

Revised figures by the National Statistics Institute said the economy contracted by 1.3 percent in the 12 months through the second quarter, more than previous estimates of 1 percent.

The institute confirmed the second quarter’s 0.4 percent drop from the previous three month period.

“The latest data for the second quarter show that the downturn in the Spanish economy is deeper than previously thought and accelerating,” said from Robert O’Daly, senior economist for the Economist Intelligence Unit.

He said that data revisions suggest the Spanish and Italian economies are on similar paths as both countries suffer the effects of fiscal austerity and weaker external demand.

“Their deteriorating growth prospects will make fiscal consolidation efforts all the more challenging and possibly counterproductive,” said O’Daly.

The yield hasfallen since reaching a record of 7.75 percent on July 25 afterECB President Mario Draghi said the central bank may interveneto curb governments’ borrowing costs and win them time toimplement fiscal changes.

Expectation that such a plan will be approved in some form next week at the ECB’s monthly policy meeting have already brought down borrowing rates for Spain and Italy.

The impact was evident in Spain’s latest bond auction on Tuesday, when the Treasury sold nearly (EURO)4 billion in short term debt auctions at much lower interest rates.

MADRID (Reuters) – Catalonia, which generates around a fifth of Spain’s economic output, will tap a state liquidity line for just over 5 billion euros ($6.26 billion), a spokesman for the north eastern region’s government said Tuesday.

The Treasury sold (EURO)1.67 billion in three month bills at an average interest rate of 0.95 percent, down from 2.43 percent in the last such auction July 24.

It sold (EURO)1.93 billion in six month bills on a yield of 2.03 percent, down from 3.69 percent.

LONDON, Aug 9 (Reuters) – European shares neared their highsfor the year on Thursday and oil prices rose after Chineseeconomic data kept alive talk that central banks will ride tothe rescue again, five years after the financial crisis began.

Eighty two percent ofrespondents said that within two years banks will need anotherlong term refinancing operation similar to those in which theEuropean Central Bank pumped more than 1 trillion euros ($1.23trillion) into the financial system, Fitch said.

Europe’s stock markets began their latest rally two weeks ago when ECB President Mario Draghi said the central bank was “ready to do whatever it takes to preserve the euro”, raising hopes of bold steps to help lower the borrowing costs of Spain and Italy.

It was only last week that he made a promise to safeguard the euro and added that the central bank would adopt any means necessary to achieve this course of action.

The drop in European shares was complemented by greater demand for German government bonds – traditionally favored by risk averse investors.

“There’s been a bit of risk off … and we’re following US Treasuries higher, but agenda wise things are quiet. We could go sideways till we get into September. There’s no supply next week that might give us some support,” a trader said.

The euro – the key barometer of faith in the euro zone’s ability to overcome its debt problems – was down at $1.228, 1.3 percent off its peak of the week.

Commodity markets took their cue from the Chinese data and the prospects of further central bank action.

However, according to two sources affiliated with the central bank, no formal vote had been cast at Thursday’s assembly and Draghi was simply attempting to separate Weidmann.

Brent crude eased 36 cents or 0.3 percent to $112.86 a barrel, and US crude inched down 0.2 percent to $93.16 a barrel.

World stock markets were mostly lower Thursday after the US Federal Reserve took no new action to boost the US economy and investors awaited announcements from the European Central Bank after its president vowed to keep the euro currency union intact.

At a press conference, Draghi said the ECB would draw up a mechanism in the coming weeks to make outright purchases to stabilize stressed euro zone borrowing costs.

Earlier, the ECB kept its main interest rate at a record low, waiting to see if inflation and the euro zone economy slow further before deciding on any fresh cut in borrowing costs.

On Wednesday, the US Federal Reserve announced no significant monetary policy changes.

The Federal Reserve is heading toward launching a new round of stimulus to buck up the weak economy, but stopped short of doing so right away.

A number of Asian stock markets declined after data showed manufacturing activity deteriorated in several countries in the region.

The central bank said it would continue to monitor economic data and would “provide additional accommodation as needed.”.

The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based.

Investors are also looking ahead to the US government’s jobs report for July, due Friday morning, which is forecast to show hiring picked up modestly last month with 100,000 new jobs.

Reuters contributed to this report.5 commentsJoin the discussionExplore related topics: economy, stocks, markets.

NEW YORK (Reuters) – The euro rallied to a three week high against the dollar on Friday as German Chancellor Angela Merkel and French President François Hollande spoke of their readiness to do anything to safeguard the euro zone.

The Forsa Institute survey, published in the Stern weekly, also showed Merkel’s junior coalition partner, the Free Democrats (FDP), which has said Greece should quit the euro, reaching the five percent threshold needed to enter parliament.

Fifty seven percent of those polled had a pessimistic view of Germany’s economic outlook, while only 12 percent were optimistic – a gap of 45 points which is the widest margin since October 2008 when the global financial crisis hit.

Germany, Europe’s largest economy, has weathered the euro zone debt crisis relatively well so far, with exports to non European markets booming and unemployment touching 20 year lows, even though a rash of recent data have pointed to a slowdown.

The poll gave her party 36 percent, unchanged from the last poll and nine points ahead of the main opposition center left Social Democrats (SPD).

“People have the feeling that she (Merkel) is tackling the problems and is standing up for German interests,” said Manfred Guellner, head of the Forsa Institute.

A second poll conducted for ARD TV channel on Wednesday showed 70 percent of Germans are satisfied with Merkel’s handling of the euro crisis.

But a large majority also think the worst is still to come and three quarters said Germany would suffer badly from a euro breakup.

Countries that pledge to implement reforms demanded by the EU’s executive Commission also would be able to tap rescue funds without having to go through the kind of tough austerity measures demanded of Greece, Portugal and Ireland, which have had to get international bailout packages.

She has also resisted calls from France and other partners for euro bonds, or mutualised debt, saying this would remove pressure on indebted countries to reform their economies.

Mr Draghi and a handful of other members of the central bank’s governing council are known to support a plan that would see the still to be approved permanent rescue fund, the European Stability Mechanism, granted a banking licence to give it access to central bank capital that could be deployed to buy bonds directly from troubled governments.

“A measure like a banking license makes us increasingly liable for undesirable developments in other countries. Ultimately it’s the German worker who, with the pennies he has saved up, becomes liable for such undesirable developments,” Rainer Bruederle, a senior member of the FDP.

“Germany’s national finances are not a self service shop for countries that are not prepared to make the changes they should have made a long time ago.”.

In the Forsa poll, the pro business FDP had 5 percent, up one percentage point from last week.

The FDP has hardened its stance on the euro zone crisis and its leader Philipp Roesler has said an exit for Greece – which is still falling far short of its fiscal targets despite two bailout programs – was no longer a taboo.

Led by the Christian Democrat Angela Merkel , it was supported by a grand coalition of the Christian Democratic Union , Christian Social Union of Bavaria , and the Social Democratic Party of Germany .

In the poll, conducted on July 23 27 among 2,501 people, 56 percent agreed that Greece should leave the euro zone while 35 percent said it should stay.

BERLIN (Reuters) – More than half of Germans are pessimistic about the economy but support for Chancellor Angela Merkel’s conservatives is holding firm, thanks partly to their tough stance on the euro zone, according to an opinion poll published on Wednesday.

Germany’s opposition leader says Chancellor Angela Merkel has accepted the need to add a separate set of measures promoting growth to the European Union’s treaty enshrining fiscal discipline.

The Forsa Institute survey, published in the Stern weekly, also showed Merkel’s junior coalition partner, the Free Democrats, which has said Greece should quit the euro, back above the five percent threshold needed to enter parliament.

Fifty seven percent of those polled had a pessimistic view of Germany’s economic outlook, while only 12 percent were optimistic – a gap of 45 points which is the widest margin since October 2008 when the global financial crisis hit.

Germany, Europe’s largest economy, has weathered the euro zone debt crisis relatively well so far, with exports to non European markets booming and unemployment touching 20 year lows, but a rash of recent data have pointed to a slowdown.

Earlier on Wednesday, Markit’s Purchasing Managers’ Index (PMI), a monthly survey of manufacturing industry, hit its weakest level since June 2009 as companies received fewer new orders and output flagged.

But Germans still feel Merkel’s conservatives are best placed to steer Germany through the crisis.

The poll gave her party 36 percent, unchanged from the last poll and nine percentage points ahead of the center left Social Democrats.

“People have the feeling that she (Merkel) is tackling the problems and is standing up for German interests,” said Manfred Guellner, head of the Forsa Institute.

Countries that pledge to implement reforms demanded by the European Union’s executive Commission also would be able to tap rescue funds without having to go through the kind of tough austerity measures demanded of Greece, Portugal and Ireland.

She has also resisted calls from France and other partners for euro bonds, or mutualised debt, saying this would remove pressure on indebted countries to reform their economies.

In the poll, the Greens were on 12 percent and the pro business Free Democrats (FDP) on 5 percent, up one percentage point from last week.

The FDP has hardened its stance on the euro zone crisis and its leader Philipp Roesler called recently for Greece – which is still falling far short of its fiscal targets despite two bailout programs – to leave the euro zone.

Spain has come dangerously close to losing affordable access to financial markets, raising the prospect of a bailout that would swamp the euro zone’s hastily erected defences.

On these projections, however, Merkel would be unable to form a new government with the FDP and would most likely have to forge a ‘grand coalition’ with the Social Democrats, like the one she led from 2005 till 2009.

In the poll, conducted on July 23 27 among 2,501 people, 56 percent agreed that Greece should leave the euro zone while 35 percent said it should stay.