When it comes to Germany and Europe, we’re used to superlatives: the biggest economy…the mightiest export engine...and even, in the case of recent eurozone growth data, the sharpest quarterly contraction.

The same goes for the banking sector. Germany is what one might, with a little stretch of the lexical imagination, call the “bankingest” country in Europe. Or, as analysts cited by the Financial Times more grammatically put it - the most “overbanked”.

Germany teems with institutions dediacted to the pursuit of mammon. Some estimates peg the number of financial enterprises at upwards of 2,000 or more. It’s a veritable pecuniary plethora that ranges from public and private banks, to the semi-public regional entities known as “Landesbanken”.

The latter have been especially hard-hit by the subprime crisis, with ripple effects felt across the banking sector. It was one of these Landesbank – IKB – that became Germany’s first financial domino to fall in the subprime crisis when it nearly collapsed under the weight of its debts. Billions of euros worth of government and other bailouts later, IKB's salvation came by way of a US private equity firm, Lone Star.

Other German banks have been targets of M&A activity recently. France's Crédit Mutuel paid almost €5 billion for Citigroups's German affiliate, while Deutsche Bank is said to be eyeing Postbank, the banking branch of Deutsche Post.

Many blame the current travails of Germany’s banking industry on the fact that there are so many banks operating in so many guises. The only way to rationalize things, the logic goes, is to consolidate the sector before it becomes too diffuse for its own good.

That’s why Commerzbank’s €10 billion, phased purchase of the Allianz affiliate, Dresdner Bank, is seen as a watershed. As the Wall Street Journal notes, “it marks the biggest transaction in Germany’s highly fragmented banking sector in nearly a decade.” The paper says the union could trigger further consolidation in the industry.

The fusion will create a banking behemoth that is, if not on a par with, at least able to compete credibly with the gargantuan likes of Deutsche Bank, Germany’s biggest bank with €2 trillion in assets. By contrast, Commerzbank-Dresdner will boast €1.1 trillion in combined assets. It will have 1,900 branches and 11 million customers. On the downside - 9,000 jobs (out of 67,000) will go – all the more difficult to stomach at a time of slowing European growth and a tightening labor market.

The hope is that the consolidation, by winnowing the wheat from the chaff, will create more viable banks able to better weather financial stress of the kind we’ve seen over the past year.

The Wall Street Journal notes that Germany’s five largest banks control only about 20% of its assets. This is well below the European average.

But saying more consolidation is needed is a lot easier than doing it. With markets still risk-averse and credit tight as ever, getting deals done in a timely manner is difficult.

As most analysts would appear to agree, it will be quite some time before Germany, er, for lack of a better term, “un-overbanks” itself.