Poland's prime minister says the deal will hit jobs and competition

The centre-right government of Kazimierz Marcinkiewicz opposes plans by Italy's Unicredito to merge two Polish banking subsidiaries.

Mr Marcinkiewicz warned the move could lead to 6,000 job losses and hit services in rural areas.

Poland's Bank Monitoring Commission is due to rule on the merger on Wednesday.

However, the independent body has come under increasing pressure to stop Unicredito's plans, which would bring together Poland's Pekao and BPH banks.

The European Central Bank stepped into the controversy on Monday after ECB president Jean-Claude Trichet expressed support for the Polish central bank chief, who is resisting government pressure to block the merger.

Competition fears

Polish government objections come at a time of increasing fears of a move towards economic protectionism by a number of EU states.

Speaking on Polish radio, Mr Marcinkiewicz said the merger "could lead to the closure of many banking units and the loss of 3,000 to 6,000 jobs in Poland".

The cuts would be most sharply felt in "small cities, where the labour market is already very weak", Mr Marcinkiewicz said.

The planned merger of Pekao and BPH was brought about as part of Unicredito's 20bn-euro (�11.5bn) takeover of German bank HVB.

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

But Polish government ministers say such a move would break an agreement Unicredito made not to buy any other Polish banks when it took over Pekao in 1999.

The government fears that if Pekao and BPH are merged, it will stifle competition within the banking industry as well as lead to job losses.