Deal struck on Polish bank merger

Poland's Prime Minister feared the merger would cause job cuts

Poland's government has struck a compromise deal with Italian bank Unicredito, which will allow the company to merge two Polish banks.

The deal will see Unicredito complete the takeover of Polish bank BPH and then merge it with Pekao, a bank which the Italian firm already owns.

Poland had originally tried to thwart the takeover, prompting intervention from the EU.

The EU argued that Poland was breaching free market rules.

"We have a good compromise," said Poland's Prime Minister Kazimierz Marcinkiewicz following the deal.

Branch sale

The preliminary agreement follows a conflict that has lasted for weeks between Poland's government and the Italian bank.

This is an agreement which is positive for Poland, our customers, our employees and for Unicredito Alessandro Profumo, Unicredito chief executive

The planned merger of Pekao and BPH - Poland's second and third-largest bank's respectively - was brought about as part of Unicredito's 20bn-euro (£11.5bn) takeover of German bank HypoVereinsbank (HVB).

Unicredito acquired BPH as part of the wider deal, and wanted to combine both of its Polish interests to create the country's biggest bank.

Under the compromise deal, Unicredito will sell 200 of the 460 branches of BPH.

Polish opposition

The Polish Government had originally opposed the merger on the grounds that the move could lead to 6,000 job losses and hit services in rural areas.

Poland also argued that the deal would break an agreement Unicredito made not to buy any other Polish banks when it took over Pekao in 1999.

However, Unicredito argued that Poland's accession to the European Union in 2004 meant that this was no longer relevant, given the EU's principle of free movement of capital.

The European Commission, which had given the green light to the Unicredito-HVB deal, intervened saying Poland was guilty of economic nationalism as well as breaching European free market rules.

Speaking after the compromise deal was reached, Unicredito chief executive Alessandro Profumo said the agreement was "positive for Poland, our customers, our employees and for Unicredito".