The financial crisis is forcing Germany to abandon its post-war banking system. The EU is promoting the shake-up. "The German model of three pillars—private banks, co-operatives and [state-owned] savings banks—is outdated", Neelie Kroes, the EU competition commissioner, told a German newspaper recently. "It does not correspond to the role that the German economy plays and should play."

The EU has long been a critic of German banking, and has already forced local governments to withdraw the guarantees once given to the state regional banks, or Landesbanken. But there is little doubt that Germany is being forced away from an eccentric post-war structure originally designed to aid reconstruction. Domestic consolidation is already well advanced, although it remains too...