St. George’s Day in Catalonia — commemorating the slaying of an evil dragon — is meant to be a celebration of love, accompanied by romantic exchanges of books and roses. This April, a highly political banking deal loomed unexpectedly large over festivities.

For the iconic Catalan lender Banc Sabadell, the dragon to be killed was Madrid-headquartered banking giant BBVA, which is pressing a hostile offer to buy it for €17 billion in stock.

The catchphrase of Banc Sabadell’s ads, sung on radio and TV, was: “It’s April again, the insatiable dragon is here. If we kill him, he doesn’t seem to learn. What should we do to make him understand?” Prominent Catalan personalities then proposed various ways to fend off dragon attacks.

Tensions are now at an all-time high as Barcelona and Madrid await the results on Oct. 10 of the second takeover offer by BBVA, at a higher price per share, to Banc Sabadell’s shareholders.

To many Catalans, the deal is viscerally political — and not simply a matter of stock valuations. While the EU may be pushing for more bank mergers to ensure European finance houses are more internationally competitive, the idea of losing Banc Sabadell to interests in Madrid is anathema.

Banc Sabadell has a symbolic cachet in Catalonia. Were the region to win independence, it would be an important economic motor for the nation. It is critical to funding the region’s all-important small- and medium-sized enterprises.

This makes the deal a headache for Prime Minister Pedro Sánchez. Although the takeover has been approved by Spain’s antitrust authority, he has sought to attach extra hurdles to it to please his Catalan nationalist allies, who are vital to the survival of his fragile government.

Emotional element

Catalonia’s Economy Minister Alícia Romero supports the Spanish government’s extra restrictions on the deal — which include a three-year postponement of the merger once BBVA acquires a majority of shares. During these three years BBVA would not be able to fire staff, close offices or merge its IT systems or accounts, keeping Banc Sabadell as a separate entity. That makes the merger more risky for BBVA.

“It is true that there is an emotional element here,” she told POLITICO. “This is a bank that was born in Sabadell, a prominent textile city, of the Catalan bourgeoisie, which has always been committed to financing SMEs” — a sector she called Catalonia’s “economic fabric.”

Romero is member of the Catalan Socialist Party and an ally of Sánchez.

Still, she argued the core objection to the deal was that it would reduce the number of banks in the region, which would lessen competition and worsen conditions for customers.

“If Banc Sabadell disappeared, it could leave many SMEs without this financing, without these possibilities to grow and open up to markets,” she said.

Romero also argued that the government would not like to see the bank’s decision-making power shift to Madrid, since that could mean job losses in Catalonia and office closures.

The EU wants mergers

For its part, BBVA says it doing exactly what the EU wants.

BBVA chair Carlos Torres has resolutely defended the deal, insisting that both Europe and Spain need financial powerhouses of scale to compete on global markets. He stressed “both BBVA and Banco Sabadell shareholders will become the owners of a bank better prepared for the future.”

In response to Banc Sabadell’s dragon ads, BBVA launched a rival campaign called “Let’s Move Forward,” featuring actors portraying shareholders from both banks discussing reasons why the merger would benefit both sides.

BBVA is opting to sweeten the deal by announcing the highest dividends the company has ever distributed — including for Banc Sabadell’s shareholders who decide to swap shares for its own.

While Catalans have been the most outspoken opponents of the deal, no major Spanish party has come out strongly in favor. The center right People’s Party and far-right Vox have largely remained tight-lipped, just warning against the concentration of the banking sector.

The deal is also a particularly public and political clash because of the importance of Banc Sabadell’s retail shareholders, who make up about 48 percent of its owners.

“Banc Sabadell’s shareholders are, for the most part, SMEs and retailers,” said Iñigo de Barrón, former president of the Spanish association of economy journalists, who covered banks for more than 20 years. “We’re talking about the middle class, people who feel that if they end up in the hands of a very large bank that doesn’t know them at all, it’s not a pleasant thing.”

“It’s a sentimental takeover bid, the most emotional I’ve ever seen,” he added.

Madrid vs. Barcelona vs. Brussels

After losing most of their small banks in the wake of the eurozone financial crisis — many of them absorbed into BBVA — Catalans still carry the trauma of seeing outside giants swallow their economic power.

“In the last 20 years, the entire Catalan banking and credit system has been dismantled,” said Albert Batet, spokesperson of the pro-independence Junts party.

The merger “means a loss of economic weight for Catalonia compared to the economic weight of Madrid, which is where BBVA has its headquarters, a bank from Madrid, with a Spanish identity,” Batet added.

Their rivals from the Catalan Republican Left, also pro-independence, agree.

“Weakening the Catalan financial system will ultimately result in job losses, affect the financing of SMEs, and — seen from the perspective of the state — it benefits the concentration of economic power in Madrid and its local economic network, and we don’t like that,” said Isaac Albert, spokesperson for the party.

“It’s not just about sentimental reasons — although of course, we are concerned about losing a Catalan bank — it’s mainly about the real impact this has,” he said.

Catalan politicians say they support Europe’s vision of trying to foster big banks to compete with other global actors, but they don’t want to take that step themselves.

They argue such mergers should be among banks from different countries rather than within one member country, because, they say, that simply weakens the consumer’s position by reducing competition.

“Starting with two Catalan-Spanish domestic banks doesn’t seem like the solution to me,” said Catalan Economy Minister Romero.

“The solution has to come from the top; it needs a very strong and ambitious strategy from all countries. It’s not that we have to be the ones to start,” she added.