Cross-border bank mergers in the EU just had their best year in nearly two decades. At €17 billion in 2025 — up from €3.4 billion in 2024 — the numbers look like the dam is finally breaking on European banking consolidation.
The reality is more complicated. The mergers are happening, but national governments are still doing what they have always done: defending their banks from foreign takeovers, erecting political barriers where legal ones have been removed, and quietly making it harder than it needs to be.
Several forces have converged. The Draghi report — commissioned by the European Commission and published in 2024 — argued explicitly that European banks need "a truly continental span of operations" to properly support European companies competing with their US and Chinese counterparts. That framing has given Brussels political cover for deals that previously generated nationalist resistance.
The European Commission has also shifted its posture under the Draghi-influenced competitiveness agenda. Where it once viewed large mergers with suspicion, it now sees bank consolidation as a strategic necessity — particularly in sectors like banking, telecoms, and defence.
The most visible test case is UniCredit's push to acquire Commerzbank. Germany's government initially resisted the move, wary of a large domestic employer passing into Italian hands. The episode exposed exactly what Eurogroup President Kyriakos Pierrakakis — speaking in May 2026 — called out directly: Europe says it wants bigger banks, but national governments keep getting in the way.
Behind the UniCredit case is a structural problem. The ECB calculates that €225 billion in capital and €250 billion in liquidity are effectively trapped behind national borders by rules, restrictions, and political barriers. The Association for Financial Markets in Europe (AFME) has published a detailed breakdown of Banking Union gaps holding back consolidation. The legal framework for a genuine banking union exists; the political will to complete it does not.
Europe talks about banking union with confidence it rarely demonstrates in practice. The numbers on cross-border mergers look impressive in 2025. But the economies of scale that the Draghi report insists Europe needs are still being blocked by politics — not law, not regulation, not competitive concerns, but political instinct. Until member states genuinely surrender the idea that their national champions belong to them, Europe will have a patchwork of large banks rather than the continental-scale institutions it says it wants.
