The Tug-of-War: Scholz's Dilemma and Orcel's Persistence in the UniCredit-Commerzbank Saga

The proposed acquisition of Commerzbank by UniCredit has sparked a heated debate, with union representatives and German politicians voicing concerns over potential job losses and the impact on the German economy. As the negotiations unfold, the battle lines have been drawn, pitting the ambitions of UniCredit's CEO Andrea Orcel against the political interests of German Chancellor Olaf Scholz.

Navigating the Complexities of Cross-Border Mergers in the EU Financial Sector

The Potential Downside: Job Losses and Domino Effect on the German Economy

Stefan Wittmann, a union representative and a member of Commerzbank's supervisory board, has raised concerns about the potential for widespread job losses if the deal goes through. He points to the precedent set by other banks taken over by Orcel, where significant job cuts have followed. Additionally, Wittmann cites UniCredit's large holding of Italian government bonds as a potential risk, warning that sudden volatility in the Italian financial markets could have a "domino effect" on the German economy.

The Counterargument: UniCredit's Geographical Diversification

Nicolas Véron, a senior fellow at the Bruegel think tank, pushes back against Wittmann's concerns. He highlights the fact that UniCredit is already more geographically diversified than many European banks, with Italy accounting for only 35 percent of its €108 billion sovereign bond holdings and 38 percent of its €383 billion loan book. Germany and Central Europe together make up a larger portion of UniCredit's portfolio, suggesting that the bank's exposure to the Italian market may not be as significant as feared.

The Political Landscape: Scholz's Dilemma and Orcel's Persistence

Olaf Scholz's swift condemnation of UniCredit's "unfriendly attack" on Commerzbank suggests that the German Chancellor is not keen on the proposed merger. However, with his political coalition facing challenges and his own future at the head of the Social Democratic Party (SDP) in jeopardy, Scholz may have bigger concerns on his mind. In contrast, Andrea Orcel, known for his tenacity, is unlikely to be deterred easily. His successful lawsuit against Santander after it reneged on an agreement to hire him demonstrates his unwillingness to back down.

The Regulatory Landscape: The ECB's Role and Lagarde's Stance

The European Central Bank (ECB) will soon be processing UniCredit's request to raise its stake in Commerzbank to as much as 30 percent. While the ECB is bound by procedure, Christine Lagarde, Draghi's successor as the ECB president, has made little attempt to hide her support for cross-border mergers in the EU financial sector. Lagarde's comments at her last press conference, where she expressed enthusiasm for the "very interesting" process unfolding, suggest that the ECB may be inclined to approve UniCredit's request.

The Long Game: Orcel's Persistence and the Waiting Game

Given that the next German federal elections are only a year away, Orcel may be willing to play the long game. As Nicolas Véron of Bruegel observes, "One way to look at it is: Which of the two has more staying power, Andrea Orcel or Olaf Scholz?" Orcel's reputation for persistence and his willingness to pursue legal battles suggest that he may be prepared to wait out the political storm and continue his pursuit of the Commerzbank acquisition.