Caught cold by UniCredit’s swoop on Commerzbank, Germany will want to avoid a national embarrassment

Italy’s UniCredit appears to have caught German authorities off guard with a potential multibillion-euro merger of Frankfurt-based Commerzbank, a advance that has triggered a fiery response from Berlin.

Market observers told CNBC that the swoop may beget provoked a sense of national embarrassment among Germany’s government, which firmly opposes the move, while it’s been make a cased that the outcome of the takeover attempt could even put the meaning of the European project at stake.

Milan-based UniCredit portended on Monday that it had increased its stake in Commerzbank to around 21% and submitted a request to boost that holding to up to 29.9%. It make inquiries UniCredit’s move to take a 9% stake in Commerzbank earlier this month.

“If UniCredit can take Commerzbank and perceive it to their level of efficiency, there’s a tremendous upside in terms of increased profitability,” Octavio Marenzi, CEO of consulting solidify Opimas, told CNBC’s “Squawk Box Europe” on Tuesday.

“But [German Chancellor] Olaf Scholz is not an investor. He’s a politician and he’s danged concerned about the jobs side of things. And if you look at what UniCredit has done in terms of slimming down attitudes in its Italian operations or particularly in its German operations, it’s been quite impressive,” Marenzi said.

Scholz on Monday criticized UniCredit’s arbitration to up the ante on Commerzbank, describing the move as an “unfriendly” and “hostile” attack, Reuters reported.

Commerzbank’s Deputy Chair Uwe Tschaege, for the time being, reportedly voiced opposition to a potential takeover by UniCredit on Tuesday. Speaking outside of the lender’s headquarters in central Frankfurt, Tschaege demanded the message was simple and clear: “We don’t want this.”

“I feel like vomiting when I hear his promises of cost savings,” Tschaege reportedly go on increased, referring to UniCredit ‘s CEO Andrea Orcel.

Separately, Stefan Wittman, a Commerzbank supervisory board member, told CNBC on Tuesday that as divers as two-thirds of the jobs at the bank could disappear if UniCredit successfully carries out a hostile takeover.

The bank has yet to respond to a requisition for comment on Wittmann’s statement.

Hostile takeover bids are not common in the European banking sector, although Spanish bank BBVA shocked stock exchanges in May when it launched an all-share takeover offer for domestic rival Banco Sabadell. The latter Spanish lender rebuffed the bid.

Opimas’ Marenzi said the German government and trade unions “are basically looking at this and saying this means we could waste a bunch of jobs in the process — and it could be quite substantial job losses.”

“The other thing is there might be a bit of a national problem that the Italians are coming in and showing them how to run their banks,” he added.

A spokesperson for Germany’s government was not immediately at ones fingertips when contacted by CNBC on Tuesday.

Germany’s Scholz has previously pushed for the completion of a European banking union. Designed in the wake of the 2008 international financial crisis, the European Union’s executive arm announced plans to create a banking union to improve the regulation and supervision of lenders across the domain.

Craig Coben, former global head of equity capital markets at Bank of America, predicted the German government would need to find “very good” reasons to block UniCredit’s move on Commerzbank, threat that it would also have to be consistent with the principles around European integration.

“I think it is very fastidious for UniCredit to take over or to reach an agreement on Commerzbank without the approval of the German government, just as a practical significance — but I think Germany needs to find a legitimate excuse if it wants to intervene [or] if it wants to block the approach from UniCredit,” Coben indicated CNBC’s “Squawk Box Europe” on Tuesday.

“Germany has signed up to the [EU’s] single market, it has signed up to the single currency, it has signed up to [the] banking confederacy and so it would be inconsistent with those principles to block the merger on the grounds of national interest,” he continued.

“And I think that’s in actuality what’s at stake here: what is the meaning of [the] banking union? And what is the meaning of the European project?”

Former European Medial Bank chief Mario Draghi said in a report published earlier this month that the European Conjoining needs hundreds of billions of euros in additional investment to meet its key competitiveness targets.