An “unfriendly attack” on a German bank is testing the mettle of a very fragile Europe.
A fortnight ago, Mario Draghi outlined an ambitious and ultra-expensive vision for an integrated Europe that included the pan-European banking union first envisaged more than a decade ago. Within days, a sharemarket raid by an Italian bank on a German rival has underscored how difficult it will be to realise that vision.
Draghi argued that to regain its competitiveness Europe needed to invest up to €800 billion a year, or 4.5 per cent of EU GDP, in sectors like defence and technology and pursue much greater integration, including the integration of capital markets and banking envisaged when bank regulation was handed over to the European Central Bank in 2014.
German politicians and labour unions are fiercely opposed to the acquisition of an important lender to small and medium-sized companies and Commerzbank itself has been less than welcoming, although its new chief executive, Bettina Orlopp, did have a virtual meeting with UniCredit’s Andrea Orcel on Friday. Apparently, there wasn’t any discussion of a merger.
The ECB has to approve any interbank shareholding of more than 10 per cent and would also have to clear any transaction that could lead to a change of control of Commerzbank.
Memories are fresh. After the financial crisis governments across Europe were forced to bail out their banks with taxpayer funds. Commerzbank was one of those rescued by taxpayers, hence the government’s shareholding. An oft-asked question in Europe is why is the market capitalisation of JPMorgan Chase, America’s largest bank, roughly equivalent to the combined market caps of Europe’s 10 largest banks?
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