A method for establishing a pseudo-wire connection between first and second switches in a packet switched network, the method comprising: sending a label mapping message to the second switch requesting that the pseudo-wire connection be established with the first switch; reserving resources for the pseudo-wire connection at the first switch; receiving a label withdraw message from the second switch if the second switch has insufficient resources for the pseudo-wire connection and, in response to the label withdraw message, releasing the resources for the pseudo-wire connection at the first switch; and, activating the pseudo-wire connection if the second switch has sufficient resources for the pseudo-wire connection, thereby optimizing resources for establishing pseudo -wire connections of each of the first and second switches.