Poland refuses to back down on bank merger

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Poland on Tuesday raised the stakes in a dispute with the European Commission over a controversial bank merger involving Italy’s Unicredit by insisting that it could not go ahead.

The Polish government said it was playing by the rules in blocking the proposed takeover by Pekao, Unicredit’s Polish subsidiary, of BPH, the Polish arm of HVB. Unicredit is trying to combine the two banks as part of a Europe-wide merger with HVB, which has been approved by the Commission and by regulators in other EU countries.

The dispute risks inflaming relations between Brussels and Poland, where a new centre-right government with eurosceptic support took power late last year.

The Polish Treasury ministry defended its right to block the merger in a letter to the Commission. It said the deal broke a 1999 privatisation agreement under which Unicredit bought control of Pekao and promised not to acquire any other Polish bank. It said it had to uphold past privatisation agreements and was ready to meet the Commission to discuss the case.

“The ministry’s duties include monitoring investors’ execution of privatisation deals. Earlier violations of such deals by investors are one of the reasons for unsatisfactory public confidence in privatisation in our country,” the ministry said.

Pawel Szalamacha, the deputy Treasury minister, said: “In our view, Unicredito has unquestionably violated the privatisation agreement. We think the clause in the privatisation agreement stands up in the light of EU rules . . . We are talking about transparency of the whole privatisation process here. Why should we talk about a compromise?”

The Italian group has defended its merger plans. In a letter to Kazimierz Marcinkiewicz, the Polish prime minister, it said it was acting in good faith in trying to strengthen its Polish subsidiary through the merger. It also argued it was acting in accordance with the privatisation contract.

The Commission said it would study Poland’s letter, which came in response to an earlier request for information from Neelie Kroes, the competition commissioner. Warsaw is also under pressure from Charlie McCreevy, the internal market commissioner, who fired off a separate letter on Monday, giving the government 15 days to reply. Mr Marcinkiewicz responded to the deadline by saying that resolving such a difficult and important process was not “a 100-yard dash”.

Once it has studied Poland’s answers, the Commission must decide whether Warsaw has breached EU law. If it finds that it has, it would initiate proceedings against Poland before the European Court of Justice.

Polish bankers said the government was trying to block the deal by putting pressure on the country’s Bank Supervisory Commission, which is examining the plans and which must give its approval before Unicredit acquires rights to the BPH shares.

The government could also take Unicredit to a Polish arbitration panel over the alleged infringement of the privatisation contract.

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