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It's been the subject of speculation for months - but Deutsche Bank and Commerzbank, Germany's two largest lenders, have finally confirmed that they are in merger talks.

A combination between the two would create Europe's third biggest bank after London-listed HSBC and BNP Paribas of France.

It has been pushed for by Angela Merkel's government which, for some time, has wanted to see the creation of a German national champion in banking.

Yet not everyone is enamoured of the deal, in particular employees of the two banks, which is hardly surprising given that some 30,000 jobs are predicted to go following a merger.

Many of those could be in the UK, where Deutsche Bank employs nearly 9,000 people.

A significant chunk of those work at the lender's offices on London Wall in the heart of the City, home to Deutsche's biggest investment banking operation anywhere in the world, but the bank also employs 2,000 back-office staff at a site in Birmingham and is also a significant employer in Bournemouth.

The idea of creating a big national banking champion for Germany is not new.

The late Alfred Herrhausen, the legendary former chairman of Deutsche Bank, oversaw a big push into investment banking in the late 1980s in anticipation of a time when West Germany and East Germany would be reunified and the enlarged country's companies would be slugging it out on the global stage with the Americans and Japanese.

And the former chief executive of Deutsche Bank, John Cryan, argued that Europe lacked banks of sufficient size and heft to be able to ride out economic cycles compared with the US and China.

He pointed out that this obliged European banks to be ultra-efficient, compared with their global rivals, in order to survive through periods like now, of ultra-low interest rates, which eat into the profitability of lenders.

It is likelier, though, that he had in mind a tie-up with a rival like BNP Paribas rather than another German bank.

More recently, Peter Altmeier, Germany's economy minister, named Deutsche Bank as one of a number of national champions, along with the likes of Siemens and BMW.

He said that, if necessary, the German state should take temporary stakes in such companies to prevent their being taken over by foreign competitors.

So it is no surprise to learn that the German government, which owns 15% of Commerzbank following its bailout by taxpayers in 2009 during the financial crisis, has been pushing the tie-up - just as it brokered Commerzbank's own takeover of Dresdner Bank later that year.

Berlin sees the combination - and the creation of a national champion - as being essential to support Germany's massive export machine.

Other benefits of the merger, so far as Berlin views them, is that it would leave Commerzbank's lending operations as part of a bigger business.

Commerz specialises in lending to the "Mittelstand" - the mid-sized companies, many of them family-owned, many of them in engineering, that form the beating heart of the German economy.

What is especially interesting about these particular talks, though, is that, until very recently, Berlin appears to have been more enthusiastic about a merger than the management of the two banks or - aside from Cerberus, the US private equity firm which has a shareholding in both - their shareholders.

Deutsche is still in the process of integrating Postbank, another lender it acquired a decade ago at the height of the crisis, so there are doubts as to whether a combination of this size could be completed either quickly or efficiently.

Commerz took at least six years to satisfactorily digest Dresdner, according to some who worked on that deal. The executives of the two banks have themselves in the recent past raised doubts about whether such a combination was possible.

Christian Sewing, a Deutsche Bank lifer who succeeded Mr Cryan as chief executive in April last year, said only last September it would not be possible to contemplate a big merger while it was still going through extensive restructuring.

Another concern among shareholders is that a merger would require both parties to recognise some of the more poorly-performing loans on their books more realistically than at present.

Commerzbank, for example, is sitting on €8.4bn worth of Italian government debt that is currently trading at a lower value than it paid for that debt.

A merger would oblige both parties to write down the value of their assets. The stock market, of course, has already got there first: shares of Deutsche and Commerz both trade at barely a third of their book value (the value of a bank's assets), making them among the most lowly-valued banks in the world.

To put it in context, Royal Bank of Scotland's shares trade at around three-quarters of book value, while shares of Lloyds trade at around 85% of book value. The big US banks, such as Bank of America and JP Morgan Chase, currently trade at north of their book value.

Accordingly, investors fear that not only would a merger require both Commerz and Deutsche to embark in write-downs of asset valuations, they might also require a fresh injection of capital from them.

Most of this would probably need to come from shareholders in Deutsche Bank, the larger of the pair, potentially running into more than €5bn.

And that is before you even get to the possible objections of regulators, most notably the European Commission, not to mention employees. They are well represented on the supervisory boards of both banks and, given their well-founded concerns over job losses, will be likely to oppose any deal.

One possible solution to get around the need for a possible capital-raising would be for Deutsche to sell its remaining 79.5% stake in DWS, its asset management arm, which partially floated on the stock market last year. It was reported over the weekend that Allianz, the German insurance giant, would be interested in merging its asset management arm with DWS.

Another key question is what would happen to Deutsche's investment banking operations.

Apart from Barclays, Deutsche Bank is now arguably the only major non-American player in global investment banking, with the big Japanese and Swiss banks having rowed back in this area since the crisis.

Revenues from investment banking can be volatile but, for a lot of Deutsche's investors, they represent a point of difference for the bank and another income stream on which to fall back. It bore the brunt of a lot of the restructuring and cost-cutting done by Mr Cryan at his time at the bank but still remains a sizeable business.

The biggest question, though, remains whether these two are really capable of creating the kind of German national banking champion that Berlin appears to want.

Deutsche, in particular, has never really recovered from the financial crisis and has been implicated in just about every scandal since, ranging from Libor-rigging to the mis-selling of mortgage-backed securities, while now finding itself accused of facilitating money laundering.

Combining it with Commerzbank would simply be putting it together with a domestic competitor with similarly weak returns and doubling down on a banking market in which, due to the dominance of the Sparkassen (regional savings banks that tend to be owned by cities or districts), it is very hard to make a meaningful profit.

So a merger of this kind, while it would be welcomed in Berlin, would create execution risk, massive job losses, a need to raise capital, a distraction to management and would represent a doubling down on a barely-profitable market.

The cheers from Wall Street would almost be audible in Frankfurt.