The EU economy is confronted with a period of considerable anxiety. Influential figures within the region are hindering reform proposals designed to stimulate economic expansion. The most recent case is the adversarial reaction of the German government towards the attempt of Italian banking behemoth, UniCredit, to acquire a significant interest in Commerzbank – a German banking institution.
In the past week, UniCredit escalated its stake in Commerzbank to 21%, while not dismissing the possibility of pursing a total takeover. Germany’s chancellor, Olaf Scholz, branded this development as an antagonistic assault. The prospective government-forming CDU Party took an even more uncompromising stance, declaring it would obstruct any potential acquisition. It seems the German viewpoint is primarily driven by commercial nationalism and self-gain.
Extensive modifications were made to the EU banking industry following the 2008 monetary catastrophe. The most crucial amongst them was the establishment of the Single Supervisory Mechanism (SSM) in Frankfurt in 2014, aiming for a more secure EU-wide banking sector.
However, stability bears a price, visible nowhere more clearly than in Ireland. The financial capability required to comply with EU regulations are substantial and tend to disadvantage smaller banking entities, such as those in Ireland. Rigorous capital retention guidelines imply constraints on the financial risks banks can undertake in various sectors. The EU capital markets union was expected to offer alternate sources of corporate financing.
Increased transborder amalgamation and financial services trade were anticipated to a larger extent. The expected emergence of extensive-scale EU banks was believed to allocate capital where required, spurring economic expansion.
A decade later, transborder consolidation across the EU remains minimal. If UniCredit achieves in acquiring Commerzbank, it may trigger an upsurge of transborder consolidation throughout the EU. However, it seems the German government might rank domestic political interests over the optimal results for the EU.