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Italy’s UniCredit has made a surprise move with a potential merger of Frankfurt-based Commerzbank, causing a strong reaction from German authorities. Market experts believe that this unexpected takeover attempt has stirred national embarrassment in Germany, with the government opposing the merger. The outcome of this acquisition bid could potentially impact the European project’s direction.

UniCredit announced an increase in its stake in Commerzbank to approximately 21% and applied to raise it to 29.9%. This move follows UniCredit’s initial purchase of a 9% stake in Commerzbank earlier in the month. Analysts see significant potential for increased profitability if UniCredit can enhance Commerzbank’s efficiency to their level.

German Chancellor Olaf Scholz criticized UniCredit’s actions as an unfriendly and hostile attack. Commerzbank’s Deputy Chair and others have expressed opposition to the potential takeover, citing concerns about job losses and the impact on the bank’s operations.

Hostile takeovers are rare in the European banking sector, with Spain’s BBVA being a recent exception with its failed bid for Banco Sabadell. The German government and trade unions are wary of potential job losses and the perceived Italian influence over German banks.

Former European Central bank chief Mario Draghi highlighted the need for additional investment in the EU to meet competitiveness targets. The incomplete banking union remains a challenge for the region’s banks, raising questions about the future of European integration and the banking sector.

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