Expectations early this year of a speedy integration of European banks have cooled because of recent government actions.

The most dramatic move was the French government's attempt this week to help Banque Nationale de Paris in its hostile bids for Societe Generale and Groupe Paribas. Bankers attributed the government's actions to an attempt to keep Banque Nationale from falling into foreign hands.

Bankers and analysts were left wondering where European economic union ends and old-style protectionism begins.

"This is nationalism, not economic logic," said Didier Valet, a banking analyst at Dresdner Kleinwort Benson in Paris. "This goes against management and shareholder interests."

Speculation had been growing that Banque Nationale's poor profitability and low market capitalization would make it a target for foreign takeover.

By combining three of its four largest banks, France suddenly would have the world's biggest bank, with assets of more than $1 trillion. Such size, aside from contributing to la gloire de la France, would make Banque Nationale's takeover so costly that very few acquirers could manage it. As the home country of the world's biggest bank, France would be a more powerful player in global finance - at least symbolically.

At the end of March, with assets of $443 million, Societe Generale was France's largest bank, according to an American Banker survey. But in terms of market capitalization it ranked only 70th in the world.

Banque Nationale, with assets of $369 million, ranked 74th in market capitalization, and Paribas, with $285 million of assets, ranked 77th.

On Thursday chief executives of the three banks met with Bank of France governor Jean-Claude Trichet but failed to find a solution to the impasse. Both Societe Generale and Paribas reaffirmed their opposition to the Banque Nationale bid. They also publicly questioned whether the central bank's efforts to push through a merger with Banque Nationale were legitimate.

Resistance to foreign takeovers is not limited to France. Last week the Portuguese central bank intervened to block a bid by Spain's Banco Santander Central Hispanoamericano to acquire the Portuguese financial group Mundial Confianca. Portugal feared the deal would give the Spanish group too hefty a share of the Portuguese market.

Factors other than nationalism are also impeding rapid consolidation. Governments have been blocking domestic mergers on antitrust grounds as well. While in the United States even the biggest mergers of head-to-head competitors go largely unchallenged, except to require the merged banks to spin off specific units, some European countries tend to veto entire deals.

If it were not for these restraints, European consolidation probably would follow the course of bank consolidation in the United States: Local banks gobble each other up, followed by regional mergers, followed by deals at the national level. In Europe the process would be mergers within countries, followed by large transactions between banks across the European Union.

In April, for example, Italy's central bank blocked an $8.8 billion bid by San Paolo-IMI SpA for Banca di Roma SpA, Italy's third-biggest bank. Bank of Italy also indicated it would block a bid by UniCredito Italiano SpA for Banca Commerciale Italiana SpA, the country's fourth-largest bank.

The central bank feared the mergers would produce institutions with dominant market shares in their home markets. A less controversial merger, involving the relatively small Banca Intesa and Banco Commerciale Italiana, got a green light from the central bank on Wednesday.

"It's rather confusing," said Herbert F. Aspbury, regional executive at Chase Manhattan Corp. in London. "On one hand, you have the single market and single currency which everybody has been touting, yet when it comes to bank mergers France reverts to its national interests."

Mr. Aspbury's chagrin comes in the wake of optimism concerning European consolidation, following a spate of big banking mergers including Banco Santander with Banco Central Hispanoamericano in January, and last year's mergers of Finland's Merit Oy with Sweden's Nordbanken AB and Union Bank of Switzerland with Swiss Bank Corp.

"When you look at the power of consolidation in the U.S. across state lines and the economies of scale and efficiencies that have been created, you see the same opportunities in Europe," Mr. Aspbury said.

"But for this to truly work in Europe, it has to be cross-border, and the French government's action is a serious impediment to consolidation."

Bankers and analysts said antitrust policy and nationalism are not the only obstacles to rapid consolidation.

Andrew Hilton, the president of the Centre for the Study of Financial Innovation, a London-based think tank, says many European banks are mutuals or government-controlled, making it more difficult to merge them.

First, they have few, if any, private investors eager to make a killing by selling out, and politics-usually in the form of job preservation and patronage-often plays a big role.

As in the case of Banque Nationale, foreign takeovers also make European governments uneasy because banks are viewed as a national strategic interest.

"Nothing is clean in Europe," Mr. Hilton said. "Outside the U.K., the markets are not really free. And most continental Europeans are good Europeans until they have to do something about it."

Still, some observers believe the current round of controversy over consolidation in Europe is only a phase.

They predict that once domestic consolidation is sorted out and European governments feel they have banks strong enough to compete on an international level, consolidation will move across borders. They predict this will happen within three or four years.

They also argue that what is happening in Europe is not all that different from what occurred in the United States.

"Ten or 15 years ago, U.S. regulators were just as nationalistic about controlling banks as Europeans are currently," said Herve de Carmoy, a former French investment banker who is now managing director of Rhone Group, a New York-based private equity firm.

"The first stage is to make sure you have winners in your own country and the second stage is cross-border mergers."

If U.S. regulators now see no problems in allowing big cross-border mergers, he added, "it's because you've already done your consolidation and feel comfortable with a Deutsche Bank taking over a Bankers Trust Corp."

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