- Government will hammer out its position in high-level talks
- Chancellor is skeptical that a deal will fix banks’ problems
Executives are looking for reassurances they’ll get government backing for potential job cuts as they consider going public with their potential plans, according to people involved in the discussions. While the German Finance Ministry has encouraged the struggling banks to combine, Merkel has stayed on the sidelines so far, the people said, asking not to be identified discussing private deliberations.
The government owns 15 percent of Commerzbank and the chancellor will eventually have to give the deal her green light in order for it to happen.
Proponents of a deal say the combination would create a stronger German champion that can better compete with rivals but Merkel remains skeptical that a merger would fix the banks’ problems and the chancellor is keen to avoid being drawn into more bank bailouts. With as many as 30,000 jobs under threat, the possible combination of Germany’s two largest listed lenders is also likely to face a public backlash and no one wants to be seen as the instigator.
Despite those reservations, the discussions have continued to move forward. Deutsche Bank Chief Executive Officer Christian Sewing and his counterpart at Commerzbank, Martin Zielke, are increasingly looking at a combination as their best option as their restructuring efforts fail to quickly bear enough fruit, people have said. The Finance Ministry is also concerned that the deal needs to happen now before Germany’s slowing economy makes such a move even more difficult.
Spokespeople for Deutsche Bank, Commerzbank, the Chancellery and Finance Ministry declined to comment.
An announcement of formal merger talks is potentially imminent, the people said, but executives want to dispel doubts over their political cover before moving ahead. The two banks’ supervisory boards are both due to meet next week, separately, and that could be an opportunity to finalize an announcement.
As the banks deliberate the merits of a deal, the government’s position is still being hammered out, the people said. While the Finance Ministry clearly backs the deal, the government’s stance will be decided in talks that also include the Chancellery and Economy Ministry, headed by close Merkel ally Peter Altmaier, they said.
Finance Minister Olaf Scholz is keen to create a national champion for the German banking industry and wants to bolster Deutsche Bank before the economic slowdown starts to bite. Union leaders from Deutsche Bank and Commerzbank have closed ranks in opposition to the potential job losses, warning the risks of a tie-up would outweigh the advantages.
Labor representatives aren’t alone in their criticism. Representatives of two large Deutsche Bank shareholders have expressed doubts about a combination, while financial regulators are also wary, according to people familiar with the discussions.
For the politicians, there’s also the prospect of European parliamentary elections in May, where Scholz’s Social Democrats will be competing with Merkel’s Christian Democrats. With their national coalition already coming under pressure, particularly from Scholz’s rank-and-file, high-profile job losses would make life difficult for both leaders.
In recent days, Scholz himself has steered clear of the issue, dodging questions when asked by lawmakers at closed-door meetings, according to people briefed on the discussions. At another meeting last week, one of Scholz’s deputies waved off the idea that the ministry was pushing a tie-up, the people said.
While executives may want a solid commitment from Berlin, they’re unlikely to get public support from the chancellor and will likely have to make do with whatever reassurances she is prepared to offer in private, some of the people said.