The five economists who make up the German Council of Economic Experts, known as the "five wise men", and who advise the German federal government, have shown their rejection of the merger plans of Deutsche Bank and Commerzbank. Both financial entities acknowledged last Sunday, through a joint statement, that they had begun negotiations for a merger.
The prestigious group of economists composed of Christoph Schmidt, Lars Feld, Isabel Schnabel, Achim Truger and Volker Wieland, fear that the taxpayer's money runs the risk of being used excessively on the assumption that the "global bank" resulting from the merger of the two largest entities in Germany into crisis. "We are not convinced that this is a good solution," said Isabel Schnabel, the only woman member of the group of experts during a press conference in Berlin.
"After a merger of this kind, it is perfectly clear that a bank like this will never sink, in this sense, I would clearly advise against the creation of an even bigger national champion," said the economist, mentioning the possibility that the federal state has to get involved in the merger. "In that sense, I think it's a very bad idea in every way."
The German economist recalled how taxpayers had to pay for bank rescues during the financial crisis. "You have to ask yourself if you have not learned anything from the financial crisis," Schnabel insisted. "From any point of view it's a very bad idea."
In his opinion, "is not the solution" for the problems of both banks because the alleged cost savings that are to be achieved through dismissals and closure of subsidiaries is "difficult to realize" and is "politically controversial," he added. Schnabel was referring to the possibility that the merger could cause the loss of between 30,000 and 50,000 jobs, according to estimates of unions and associations of private investors.
According to Schnabel, if the aim of Berlin with this bet is to "reinforce" the national banking sector, it would be best if the German government withdrew from the business and left more room for the entities to improve their profitability.
At the press conference, none of the five wise men made a positive assessment of the project. Lars Feld, another of the five wise men, said he saw no dissenting opinions on the subject. "The two entities would have to determine for themselves if a merger would make sense from the economic point of view, but if this were organized with state aid, we would have to be very skeptical," said the economist.
The confirmation that the two banks have started negotiations to study the possibility of a merger has not been commented on by the German government, but Chancellor Angela Merkel spoke in favor of the government's prudence in the operation.
"These are decisions of the private sector and I advocate that the German government does not interfere in them with a vote," Merkel said in a conference on international politics in Berlin on Tuesday. "Consolidations in the banking market are nothing new in Europe.
The new head of supervision of the ECB, Andrea Enria, has criticized the Financial Times the idea of creating national or European champions to compete with the rivals of the world. This idea, launched in the first interview he has granted after being elected to head the Supervisory Board of the organization.
"I do not particularly like the idea of national or European champions. When you are a supervisor, you should not promote any concrete structural result, "he told the British newspaper. If the ECB adopts this position, it could lead to a conflict with the government of Angela Merkel, who defends the merger as a way to protect its financial sector. Despite his criticism of the idea of national champions, Enria declined to comment on the specific case of Deutsche and Commerzbank.
The ECB's opposition to European champions is reminiscent of that of the European Competition Commissioner, Margrethe Vestager, who last month vetoed the merger of Siemens with Alstom, unleashing the fury of the governments of Germany and France.
"What we look at is the ability of a bank to meet its objectives. A bank that has a powerful business, a good capital situation, is capable of generating profits and of respecting its capital requirements in the medium term, "added Enria.