European banks need to look beyond their home countries for mergers in order to tap the region’s full economic power and become more competitive, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said.

“If politicians fight it, they’ll be sub-scale forever, and that’s not good for their economy,” Dimon said Thursday in a Bloomberg Television interview from Paris. “They should really think through the choices here and allow these banks to merge and go pan-European.”

Dimon said he thinks "there’s some truth" to the idea that Europe is overbanked, and blamed holdups in European Union regulations for delaying consolidation.

"These banks need to merge to have the kind of scale, diversification, but it’s hard to do if you don’t finish regulations like the single regulatory mechanism, the insurance mechanism,” Dimon said.

Deutsche Bank AG is intensifying informal talks to merge with Commerzbank AG in a marriage of struggling German lenders. Bloomberg reported in January that the European Central Bank favors a cross-border combination for Deutsche Bank to drive integration in the region’s financial markets, while some German government officials want a national banking champion.

The potential Commerzbank deal has faced stiff resistance from labor representatives because as many as 30,000 positions could be at risk if a combination were agreed, according to people familiar with the matter.

"Even in Germany, if you don’t allow consolidation, you have to allow them to become efficient,” Dimon said. “That does mean layoffs. It’s better for the long-term health of the industry, it’s not good in the short-run, particularly for those people, and I’m very sympathetic to that. That’s a political issue, not a regulatory issue, so both sides have to think about what they really want one day."

JPMorgan, the largest U.S. bank, has grabbed share from some struggling European rivals on its way to becoming the top global firm in revenue from trading and investment banking.

--With assistance from Francine Lacqua