* FTSEurofirst 300 up sharply for second day running
* French telecoms rally as M&A talk heats up
* Greek stock market rises 7.4 pct (Updates prices, adds detail)
By Danilo Masoni
MILAN, Feb 15 (Reuters) - European shares rose sharply for the second consecutive session on Monday, boosted by a rebound in banking stocks and French telecoms shares amid signs of takeover activity in the sector.
The pan-European FTSEurofirst 300 index, which rose 3 percent on Friday, gained a further 3 percent.
But the index remains down around 12 percent this year because of worries over a global economic slowdown and the health of Europe's banking sector.
Bank stocks rose on Monday as investors welcomed plans by the European Central Bank (ECB) to buy bundles of Italian bad bank loans as part of its asset-purchase programme.
The Greek stock market climbed 7.4 percent after the debt-ridden country's central government registered a primary budget surplus of 1.193 billion euros ($1.34 billion) in January.
"It's no surprise to see markets rebounding after excessive movements seen in the last few weeks," said Riccardo Ambrosetti, chairman of Italy's Ambrosetti Asset Management. "European equities have been particularly hit and we expect a faster recovery for battered financial stocks."
Italian bank Monte Paschi rose 8.1 percent, while shares in rivals Banco Popolare and Intesa Sanpaolo climbed 6.9 percent and 3.4 percent respectively.
The rise in the Italian banking sector helped other financial stocks in Europe, with Dutch group ING rising 5.9 percent and Credit Suisse up 2.9 percent.
French telecoms shares surged on prospects of a merger between Orange and rival Bouygues Telecom. Orange, scheduled to report results on Tuesday, said talks were continuing between the two.
Shares in Bouygues Telecom parent Bouygues climbed 6.7 percent, Orange rose 3.4 percent while rivals Iliad and Numericable-SFR rose 3.9 percent and 8.4 percent respectively.
"This latest news reinforces our belief that French market consolidation will happen, and Iliad will greatly benefit from it," analysts at Bryan Garnier wrote in a note.
Traders added that expectations of more monetary stimulus from the ECB were providing further support for equities. Its president Mario Draghi reiterated on Monday that it was ready to act in March.
Germany's Bundesbank slashed its forecast for inflation on Monday, suggesting the same will happen across the wider euro zone, which could increase pressure on the ECB to loosen money supply.
Today's European research round-up (Editing by Andrew Heavens and John Stonestreet)