EUROPE - The euro is likely to remain in its current form despite the ongoing financial turmoil, according to several European institutional investors, but UK investors are sceptical.

According to a new survey conducted by Allianz Global Investors, 80% of the 140 European institutional investors surveyed believe the euro will survive in its current form.

However, more than 40% of them agree that regulators will have to implement several stability mechanisms to strengthen the euro-zone in the future.

Andreas Utermann, chief investment officer at RCM - a research company owned by Allianz Global Investors - believes a break-up of the euro is unlikely, due to the prohibitive costs such a scenario would entail.

"While it is still not clear whether the haircut on Greek debt will go beyond July's proposal of private sector participation of roughly 20%, it seems unlikely Greece will exit the euro-zone," he said.

"Nevertheless, we must recognise the impact of political risk on the current capital markets environment."

A quarter of institutional investors surveyed also expect the introduction of euro bonds, but most remain highly sceptical when it comes to the introduction of a joint fiscal regime for the euro-zone, often cited as a prerequisite for the sustainability of the currency.

In spite of the optimism expressed by most European institutional investors, UK investors are doubtful the euro will survive in its current form.

While some expect Greece to default and exit the monetary union, their counterparts in Germany, France and Italy believe the euro will endure these current challenges.

Utermann said: "Scepticism from the UK about the euro is nothing new. However, there is a growing appreciation that, despite being outside the single currency, the UK economy derives significant benefit from a stable euro due to its strong economic and financial relationships with the euro-zone."

Last month, several assets managers and UK pension funds expressed their concerns over a potential exclusion of Greece from the euro-zone.

Most of them predicted Greece would bow out before Christmas, as the country has failed to meet the criteria for further bailouts.

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