LONDON (Reuters) - A long-awaited consolidation of Europe’s banks is rapidly taking shape, but it is being executed through shotgun rescues and bargain purchases by stronger banks rather than a harmonization of businesses across borders.

Governments, which in the past have been the biggest barrier to takeovers by blocking dominant players, are now acting as kingmakers by stepping in to rescue ailing banks.

They are nodding through deals they would have blocked a year ago, giving the region’s better capitalized banks such as Spain’s Santander, Britain’s Barclays and France’s BNP Paribas the chance to dramatically expand market share at “once-in-a-generation” prices.

That strategic shift could also allow ING ING.AS to buy the Dutch assets of ABN to create a national powerhouse just days after Lloyds TSB (LLOY.L) was allowed to grab a dominant position in the UK.

There has also been speculation that Switzerland’s UBS UBSN.VX and Credit Suisse CSGN.VX or BNP Paribas (BNPP.PA) and Societe Generale (SOGN.PA) could come together if turmoil from a global credit crisis deepens.

Santander (SAN.MC) and Barclays (BARC.L), meanwhile, are taking advantage to pick up cheap cross-border assets.

“If banks can go out and buy assets and can get them at less than book value, that has got to make a handful of institutions stronger,” said Simon Maughan, analyst at MF Global.

“Growth will resume at some point and those banks with materially more market share that they obtained cheaply will be the winners,” he said.

BENELUX ASSETS IN PLAY

The latest flurry of interest has fixed on Fortis FOR.BR, putting the Belgian-Dutch group at the heart of consolidation speculation for the second time in a year.

Fortis’ part in a consortium takeover of ABN AMRO last year stoked an expectation that further M&A activity would follow. But its parameters have changed with the global financial crisis.

During a frantic weekend of talks, Fortis was effectively put up for sale. BNP Paribas and ING showed an interest but pitched low-ball offers, and the Belgian, Dutch and Luxembourg governments opted to part-nationalize it.

That may still not be enough and Fortis is selling assets to shore up its capital, including the ABN Dutch retail bank business it bought for 24 billion euros but has not taken delivery of yet. Those assets may only fetch about 7 billion euros now, analysts at Dresdner predicted.

ING has agreed to buy the business and will seal a deal in the next two weeks, people familiar with the matter said.

Britain’s government also stepped in to nationalize ailing lender Bradford & Bingley BB.L on Monday and Santander stepped in to buy its deposit book and branches, adding to its planned takeover of Alliance & Leicester ALLL.L.

“(It) will mean, in effect, Abbey, A&L and B&B are all merging on the High Street,” said Alex Potter, analyst at Collins Stewart.

Santander, BNP and others are benefiting from a strong capital position and more confidence among investors in their futures than most of their rivals.

The consolidation is also happening on a smaller scale elsewhere on the continent.

Denmark’s Vestjysk Bank (VJBA.CO) on Monday said it planned to buy two smaller peers hurt by the credit crisis, the latest in a surge of consolidation in the country’s banking sector.

Even the fragmented German market has consolidated, with a trio of big deals including a long-predicted but never delivered merger between Commerzbank and Dresdner, as the global credit shake-out triggers action.