What a drag

In answer to the letters sent by the European Commission to the Polish government, Paweł Szałamacha, Deputy Treasury Minister, said that Poland does not question the Commission's competence to decide on pan-European mergers, however it wants to help UniCredit (UC) honor the provisions of the 1999 privatisation agreement.

"We are talking about the transparency of the whole privatization process here. Why should we talk about a compromise? Contracts must be honored - that's the main rule in law that applies both to big and small entities such as UniCredit," Szałamacha said.

The European Commission  asked the Polish government to explain why it has delayed granting UC permission to take over the 71-percent stake that German lender HVB Group AG holds in Bank BPH SA.

Last Friday, the Financial Times reported that UC is ready to make some concessions in order to speed up the merger process. These would include slowing down job cuts, limiting them to 1,000 a year and  boosting the role of Polish managers with a board in which the chairman and half the directors would be Polish.

Poland is the last country still to approve the international merger. The Polish and European antimonopoly offices gave the green light to the deal in October, but it is still subject to approval by Poland's Commission for Banking Supervision (KNB). The new government is strongly against the merger, and the government's representatives on the KNB will vote against approving the fusion.

The Treasury Ministry says that the 1999 agreement, under which the Italian lender bought Pekao SA, bars it from buying another large Polish bank. Andrzej Mikosz, the former Treasury Minister, called on UC to sell its shares in BPH to a third entity to avoid creating a banking oligopoly in the Polish market.