Germany does not see legal means to prevent UniCredit takeover, sources say

By Christian Kraemer

BERLIN (Reuters) -The German government does not see legal powers it could use to prevent the takeover of Commerzbank by Italy's UniCredit, two government sources told Reuters on Tuesday.

The Foreign Trade and Payments Ordinance - which in certain cases can be used to prevent takeovers from non-EU countries - doesn't apply because banks are under the supervision of the European Central Bank, the sources said.

Categorising the German bank as "critical infrastructure" - which could also give the government more sway - is not a realistic option either, one of the sources added.

Asked on Tuesday how a UniCredit takeover of Commerzbank might be prevented, Finance Minister Christian Lindner said: "This is a matter for the board of managing directors and the supervisory board of Commerzbank."

The decision will now be for the two banks, the sources said.

UniCredit, whose CEO has said he would be interested in a tie-up between the banks, said on Monday it was preparing to increase its stake in Commerzbank to 21% - a move German Chancellor Olaf Scholz called "an unfriendly attack".

The Italian takeover interest has prompted a backlash in Germany and is an embarrassment for the government, which appears to have sold part of its stake in Commerzbank without realising that UniCredit would snap it up.

Commerzbank supervisory board members on Tuesday voiced fierce opposition to a takeover, vowing a long fight with UniCredit's CEO Andrea Orcel if necessary.

"This takeover debate will not be over until the last argument has been exchanged and the last barrier has fallen. And there is a very, very long way to go until then. Mr. Orcel should be prepared for this," supervisory board member Stefan Wittmann said.

Commerzbank, with more than 25,000 business customers, almost a third of German foreign trade payments and more than 42,000 staff, is a linchpin of the German economy, Europe's industrial motor.

The discussions about a takeover are unfolding at a delicate time for Germany. The coalition government, one of the most unpopular in recent history, is preparing for national elections next year.

Strong recent gains for the right-wing Alternative for Germany (AfD) and the left-wing BSW are squeezing the three-party government.

That pressure is strongest on the smallest member of that coalition, the liberal FDP party, which runs the finance ministry, responsible for the stake sale.

(Reporting by Christian Kraemer, Writing by Maria MartinezEditing by Mark Potter)