The proposed change to the current regulations is intended as a sweeter for global banks who are considering moving the staff from their London home to the continent but may have reservations over Germany’s the strict laws governing employment.
The move would apply to those earning more than £215,000 (€250,000) in the banking sector and would make it easier for those companies to dismiss staff.
The move is being pushed by Volker Bouffier, vice chairman of the Christian Democratic Union (CDU) which is lead by Mrs Merkel, who backs the move.
Chancellor Angela Merkel (L) with Volker Bouffier, vice chairman of the CDU
Mr Bouffier said: We do not need the German protection against redundancy for top earners in banking.
"I see a political prospect of changing this law by the middle of next year or in the Autumn (of 2018), once the new government is in place."
Importantly, Mr Bouffier is also the premier of the state of Hesse, home to the country's financial centre, Frankfurt.
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The British government has been telling everyone in London that… everything will stay as it is… That is complete nonsense. I don't think it will work out for Britain
Volker Bouffier, Vice Chairman of the CDU
He added: "I have discussed this with the German chancellor, Angela Merkel, and she is supportive, as is the finance ministry.”
While the City is keen to retain its status as the European capital of finance Dublin, Paris as well as Frankfurt are hoping to take over the crown.
Volker Bouffier (R) hopes to lure the City of London banks to Frankfurt after Brexit
France is also hoping to loosen its rules and regulations governing dismissals but at the moment there is some uncertainty over the ability to achieve this with Emmanuel Macron newly installed as the president and questions remaining whether or not he will have to preside over a coalition administration which may block any change.
Mr Bouffier said he expected the majority of the big global US banks to move to Frankfurt as their primary European base.
He said: "The British government has been telling everyone in London that… everything will stay as it is, including with passporting to Europe.
"That is complete nonsense. I don't think it will work out for Britain."
The City of London financial services could be adversely affected after Brexit
He added: “Germany offers stability. I expect concrete decisions from banks in summer. They are not going to wait for the outcome of (Brexit) negotiations."
Any move altering the law to make senior managers at banking firms exempt from legal safeguards against sacking is likely to be highly contentious and met with opposition from the trade unions who are likely to reject the move.
A spokesman for one of the largest financial services trade unions, Verdi, said that it would not support such a change.