The transformation of Europe's financial and industrial landscape surged forward yesterday when Deutsche Bank announced a £33 billion sterling (#54 billion) takeover of Dresdner Bank, its long-time German rival.

Bankers and analysts predicted more big mergers and acquisitions across Europe as companies seek competitive advantage in a world shaken up by technological advance and the pressure of global capital markets.

In one typical reaction, Mr Marcel Ospel, chief executive of the Swiss bank UBS, which itself merged with Swiss Bank two years ago, said: "We believe the European financial sector generally up to now is only 30 per cent consolidated."

Experts expect that the restructuring of corporate Germany will be driven largely by Allianz, the insurance giant, which will hold up to 40 per cent of the merged retail banking operations. Allianz encouraged the DeutscheDresdner merger and its shareholdings in other companies give it influence over the whole German economy. One early move could come if Allianz sells part of its holding in HypoVereinsbank, the second largest German bank, to Munich Re, the world's largest reinsurance group. Munich Re said it was ready to enter talks.

Mr Rolf Breuer, Deutsche's chairman, made clear that his ambitions now extended beyond Germany. "We are a European powerhouse with global reach for phase number two - European consolidation."

Deutsche shareholders will hold between 60 and 64 per cent of the new bank, which is to keep the name Deutsche Bank and will be the world's largest in terms of assets with £1,245 billion, Dresdner shareholders will have 36 to 40 per cent, depending on the final merger terms due to be decided by November.

Chancellor Gerhard Schroder praised the Deutsche-Dresdner merger, even though thousands of employees in Germany are expected to lose their jobs as the new bank reduces its 140,000 staff worldwide by 16,000. "The merger creates new opportunities," Mr Schroder said. "This new bank can play a strong role on international financial markets."

Neither of the banks would comment yesterday on the impact of the merger on its Irish operations. Deutsche Bank employs 450 people at the International Financial Services Centre. Dresdner, which also has operations at the IFSC, employs 50 people.