ForexSpace.com – Having shoved her passport back into her tote bag and jumped aboard the next available flight to an ailing euro zone nation, Angela Merkel landed in Paris to welcome Francois Hollande into his new post as President of France Tuesday.

This trip comes fresh off the back of a jaunt to Greece where, according to a number of jovial forex reporters, the German chancellor was quizzed by customs officers. Name? asked the officers. “Angela Merkel” came the response.

Nationality?

“German.” 

Occupation? 

“No - just visiting for a couple of days”!

And thanks to the French public’s decision to elect controversial, anti-austerity Hollande, many analysts would not be surprised to hear that she was subjected to a similar level of airport investigation chez Paris.

Her staunch advocacy of proposed austerity measures in nations such as Greece and France has undoubtedly made her an unpopular figure with beleaguered French and Greek citizens. But thanks to a recent poll of the German populous, she appears to be falling out of favour with her own nationals as well as those across the barren plains of the wider euro zone. The results of an election held Sunday in North Rhine-Westphalia showed that support for Merkels’ Christian Democrats has fallen to 26 percent from 35 percent in 2010, the worst results since World War 2. While the ZEW index - which tracks economic sentiment – fell in Germany from 10.8 in May from the previous month’s 23.4, and in the wider euro zone hit an abysmal -2.4 from last month’s 13.1.

Critics of Merkel’s hard-line approach to euro zone debt reduction have told how this regional election sets a precedent ahead of national elections due in 2013. But Merkel was quick to assert that the decision by some unhappy citizens would only lead to a regional government that wouldn't take on "ever more debt".

Despite the potentially worrying consequences of such sentiment in her homeland, the German chancellor – who has been in office since 2005 – will undoubtedly have taken some comfort from the positive German data which emerged yesterday. Thanks to some surprisingly strong data from the country, the euro zone managed to keep its GDP running flat according to reports. Comments from some forex strategists will also be providing some vindication for the increasingly unpopular chancellor. "It's good stuff. Germany could help the rest of the euro zone, but Germany cannot lead the whole of the euro zone by itself - we need something else," said Benoit Peloille, strategist at Natixis, maintaining a bearish outlook on European equities in the short-term.

According to the data from Eurostat, 59 percent of European large caps – companies worth over $10bn - have met or beaten forecasts with first quarter earnings, up from 52 percent in 2011. But the overall figures remain weak, with market expectation having been knocked back so far that analysts were pleased with data which would otherwise have been considered a disappointment.

Ashraf Laidi, Chief Global Strategist at City Index/FX Solutions, commented: “Unexpectedly strong German GDP helped the common currency to recover a portion of its recent losses at the beginning of the London session. The German economy grew 0.5 percent in Q1 q/q and 1.2 percent y/y which bested expectations and helped the Eurozone to avoid a technical recession as Eurozone Q1 GDP remained unchanged both q/q and y/y after declining 0.3 percent q/q in Q4.

Turning to live currency rates, Laidi added: “However, the EU outlook remains negative due to worsening labor market and above target inflation. EURUSD trades near session highs around 1.2860.”

Meanwhile, George Osbourne has been throwing his two penny’s worth in to the debate. He has voiced his concern that all this ‘open’ Fin Min speculation over Greece leaving the euro zone is causing more problems than it is solving. “The euro zone crisis is very serious and it’s having a real impact on economic growth across the European continent, including in Britain, and it’s the uncertainty that’s causing the damage,” he said.

“But it’s the open speculation from some members of the euro zone about the future of some countries in the euro zone which I think is doing real damage across the whole European economy.”

So Merkel’s speech yesterday is unlikely to have been well-received by the British chancellor. Merkel raised tension surrounding the prospect of a so-called ‘Grexit’ by speaking of “solidarity for the euro”, causing global markets to fall sharply in the wake of her words. The FTSE-100 index of Britain’s major companies fell by two per cent to 5465, with bank shares hit particularly hard according to live rates. “The solidarity for the euro will end only if Greece just says, 'We’re not keeping to the [austerity] agreement.’ But I don’t expect that to happen. I do think they are making an effort. There are many, many people in Greece who actually want it,” she added.

“I believe it’s better for the Greeks to stay in the euro area, but that also requires that we set out a path on which Greece gets back on its feet step by step.”

Sarah Cox, Staff Writer