German or not at all
Berlin wants to stop Italian bank UniCredit from taking a major stake in Germany’s Commerzbank – just after Lufthansa has taken over Italy’s flag carrier airline. Double standards?
BERLIN/ROME (own report) – The German government’s rejection of UniCredit’s share swoop on Commerzbank is causing considerable resentment in Italy and other European countries. The large and expanding Italian bank wants to raise its stake, opening the prospect of a merger or takeover. German Chancellor Olaf Scholz has denounced UniCredit’s move as an “unfriendly attack”. Meanwhile, German Finance Minister Christian Lindner has been leaning heavily on his Italian counterpart to help prevent a takeover of Commerzbank. The Italian government, along with bankers and think-tank experts from other European countries, are pointing to double standards. Scholz, when he was still German finance minister, had called for the completion of an EU banking union to enhance Europe-wide integration. But, now, he is blocking a practical step towards consolidation in the EU banking sector. And, indeed, the German response is all the more remarkable given that Lufthansa has just taken over Italy’s largest airline, ITA Airways, which is the country’s flag carrier. Berlin’s rejection of a potential Italian takeover of Commerzbank follows an established pattern: major corporate mergers within the EU are to be realised under German leadership, or they’ll be blocked by Berlin.
The UniCredit share swoop
The move by the ambitious Italian bank UniCredit to take a bigger holding in Commerzbank began on a grand scale at the beginning of September when the German government announced that it would reduce its stake in the Frankfurt-based bank. The government had acquired a 25 per cent stake in the bank in 2008 in order to create stability during the global financial crisis. It sold off part of this stake, but still held 16.49 per cent at the beginning of September. It has just reduced its stake further to 12 per cent. The divested shares were snapped up by UniCredit, which had previously acquired around 4.5 per cent in the usual way and now, having bought some of the shares sold by the German government, suddenly held 9 per cent. The Italian bank then succeeded relatively quickly in securing a further 11.5 per cent of Commerzbank shares. This acquisition is now pending official approval to go through. On 11 September, UniCredit applied to the authorities for permission to raise its stake to 29.9 percent of Commerzbank.[1] This reveals a determined strategy to acquire a major stake in the second-largest listed bank in Germany – after Deutsche Bank – if not achieve a full takeover.
‘Unfriendly attack’
The German government has spoken out strongly against UniCredit’s attempt to become a leading owner of Commerzbank or even to take over the bank completely. At the beginning of last week, Federal Chancellor Olaf Scholz described the recent events as an “unfriendly attack” and an attempt at a “hostile takeover”.[2] It emerged at the end of last week that Finance Minister Christian Lindner had already been exerting pressure on Italy’s finance minister to thwart such a “hostile takeover”.[3] At the level of government departments, the scope for exerting influence are considered limited. UniCredit has applied to the ECB to be allowed to take over up to 29.9 per cent of Commerzbank. This application has a good chance of success because the ECB leadership around President Christine Lagarde is, in principle, in favour of bank mergers in the Eurozone. European mergers are seen as a path to stronger, internationally more powerful credit institutions. A move to stop UniCredit’s plans via BaFin, Germany’s Federal Financial Supervisory Authority, would be possible since BaFin reports directly to the finance minister. However, a blocking intervention by BaFin is considered hard to justify.[4] This is why political pressure may be the weapon of choice for Berlin in the case of UniCredit.
Lufthansa takes over ITA Airways
The Italian government is still trying to resist German pressure. At the beginning of last week, Foreign Minister Antonio Tajani expressed his “incomprehension” at Scholz’s objections. “When someone buys an Italian company there is talk of the single European market, but when an Italian buys outside Italy, one is no longer in the single European market,” Tajani complained, “That’s something I don't understand.”[5] Italy’s Foreign Minister was referring to the fact that Lufthansa has acquired 41% of the Italian flag carrier airline ITA Airways, which emerged from the now defunct Alitalia. The share deal was approved by the European Commission on 3 July 2024.[6] And, assuming Lufthansa meets certain criteria, it will be allowed to acquire an additional 49% in several further steps and acquire the remaining 10% by 2033. The rationale for share acquisition and the goal of a complete takeover is that an expanded Lufthansa will be put in a commanding position in the European airline sector. Only Ryanair recently transported more passengers per year than Lufthansa. More specifically, the German company hopes that a strong hub in Rome will facilitate a significant expansion of its flights to Africa and Latin America.
‘Dramatically lost importance’
The fact that Berlin supports the takeover of ITA Airways by Lufthansa, while trying to block UniCredit from taking a larger stake in Commerzbank, is not only causing offence in Italy. The international response has been all the more critical in view of the fact that it was Olaf Scholz who once called for closer integration in European banking. As David Marsh from the London-based think tank OMFIF (Official Monetary and Financial Institutions Forum) now recalls, the then German Finance Minister pushed for a banking union to strengthen EU financial institutions. Now he is keen to prevent a practical step towards consolidation in the European banking sector by an Italian player. “Germany’s banks have dramatically lost weight and importance compared with other euro area member states in the past 30 years,” states Marsh.[7] The EU, for its part, is now lagging almost hopelessly behind the US in finance. The market value of the largest US bank, JP Morgan, is equal to that of the twelve largest banks in the Eurozone put together. UniCredit’s attempt to close the gap, at least a little, with wider international activities facilitated in part by a Commerzbank merger or takeover represents “a watershed for Germany and Europe,” writes Marsh. Yet Germany, he notes, doesn’t like it and must be “accused of wanting banking integration only on its own terms”.
The EU speaks German
This attitude is, of course, nothing new. Bonn only agreed to the introduction of the euro as the bloc’s common currency on condition that the monetary union and the European Central Bank (ECB) would be based on German models. “The euro speaks German,” is how the then Federal Finance Minister Theo Waigel put it in 1998.[8] A similar situation has prevailed when it comes to corporate mergers and acquisitions at EU level. In the Franco-German dominated Airbus Group, Berlin has always jealously prevented Paris from being in the driving seat. A similar mega deal for the merger of European shipyards failed to materialise because Germany saw no chance of taking the lead role.[9] Much the same picture can be seen at the military level. Thus Germany is leading the development of a European air defence system (European Sky Shield Initiative, ESSI), which uses German as well as Israeli and US defence systems, but does not include French and Italian systems.[10] Berlin has also repeatedly refused to deploy EU battlegroups when their deployment would have aligned with French interests.[11] This is one of the reasons why EU battlegroups, operational since 2007, have never been deployed. As for the finance sector, we are seeing the repetition of what can be regarded as an incontrovertible rule in the EU: mergers will either be German-dominated or prevented.
[1] Christian Schubert, Inken Schönauer: Unicredit stockt auf, Scholz blockt ab. Frankfurter Allgemeine Zeitung 24.09.2024.
[2] Scholz kritisiert Unicredit scharf. Frankfurter Allgemeine Zeitung 24.09.2024.
[3] Kontakt zu Italiens Amtskollege: Lindner warnt offenbar vor feindlicher Übernahme der Commerzbank. tagesspiegel.de 27.09.2024.
[4], [5] Deutsch-italienischer Bankenmachtkampf. Frankfurter Allgemeine Zeitung 25.05.2024.
[6] Jens Koenen: Lufthansa ist bei ITA am Ziel – aber lohnt sich der hart erkämpfte Deal? handelsblatt.com 03.07.2024.
[7] David Marsh: Watershed for Europe in UniCredit-Commerzbank dispute. omfif.org 24.09.2024.
[8] See also: Das Brüsseler Abkommen.
[9] See also: Abwehrschlachten.
[10] See also: Auf Kosten Frankreichs.
[11] See also: EU-Kriegskoalitionen der Willigen.
