Financial scandals harm Scholz’s image as he gears up for chancellor candidacy

Finance Minister Olaf Scholz's image is that of a true professional: rational, serious, meticulous. The kind of man who can lead Germany through the crisis with a steady hand. Hence his old nickname "Scholzomat". EPA-EFE/HAYOUNG JEON

Olaf Scholz, Germany’s finance minister and chancellor candidate for the Social Democrats (SPD), is currently in the spotlight for his involvement in two financial scandals currently shaking German politics: the Wirecard and Cum-Ex scandals. EURACTIV Germany reports.

Could it be that Scholz regrets having been declared the SPD candidate for chancellor so early on? At the start of August, he took the stage in the Willy Brandt House to announce his candidacy with his typical mischievous smile.

The SPD had beaten all other parties to the punch and probably regarded this as a clever move. By making it clear who will be the party’s chancellor candidate, the Social Democrats are signalling much-needed inner-party stability, particularly following the divisions between the party’s wings during the last elections for party leadership.

By comparison, the Christian Democrats (CDU/CSU) and the Greens will probably continue struggling with the chancellor question for months to come.

One downside of this strategy is that those who expose themselves early will have to put up with more attacks until election day. And while Scholz accepted such a risk, he is now the object not only of one but of two political investigations dealing with financial matters: the investigations into Wirecard and Cum-Ex.

In both cases, his responsibility is still unclear, but the opposition sees clear evidence that Scholz was at least grossly negligent in his actions. Scholz himself has emphasised that he wants to clear up the whole issue.

German financial watchdog under fire following Wirecard scandal

The balance sheet scandal surrounding the payment company Wirecard raises many questions. Politicians are currently vigorously pursuing one of them: Where were the supervisory authorities? EURACTIV Germany reports.

Where was the supervision?

The Wirecard case developed into the biggest German financial scandal in recent history despite the payment service being once the pride of Germany’s digital industry, a true “national champion”.

However, in June, it was discovered that €1.9 billion had never existed on the company’s books, and the board members have since either been arrested or are on the run.

To this day, the central question remains: Where was the supervision, for which Scholz was responsible?

So far, the finance minister has had two lines of defence: on the one hand, the auditors of Ernst & Young were to blame, on the other hand, the authority would not have had the right competences to intervene. But the opposition is – unsurprisingly – not convinced.  A committee of enquiry has now been set up to clarify the final political responsibility.

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Too many meetings

In the Cum-Ex case, which involves the theft of billions in tax money, Scholz is more personally involved. In this case, some banks found a trick for how to get tax refunds without having paid the underlying taxes before.

One such bank was the Warburg Bank in Hamburg. While it should have paid €90 million back to the city of Hamburg, the city decided to waive it in 2016 and the matter became time-barred. In 2017, the federal government had to force the city government to reclaim €43 million once again.

Back then, Scholz, who was the city’s First Mayor at the time, met with Warburg boss Christian Olearius before the decision to waive the tax payment was made.

Questioned by the Bundestag, Scholz said there had only been one meeting in 2017. However, only when Olearius’ diary cast light on the fact that he and Scholz had at least three meetings in 2017, did the current finance minister confirm this.

While this was not yet proof of any influence on the proceedings, “just the fact that a first mayor repeatedly meets an accused person in an investigation and exchanges information about his tax proceedings is a conflict of interest,” Fabio De Masi, a left-wing member of the Bundestag’s Finance Committee, told EURACTIV Germany.

The fact that Scholz did not immediately disclose all the meetings weighs on his credibility and that is exactly what could hurt him the most.

Premature election campaign?

After all, his image is that of a true professional: rational, serious, meticulous. The kind of man who can lead Germany through the crisis with a steady hand. Hence his old nickname “Scholzomat”, which the media gave him a long time ago and which he himself finds “very apt”, as he told DIE ZEIT in an interview in 2013.

Therefore, the SPD campaign will emphasise his government experience and professionalism, suspects Florian Toncar of the Free Democratic Party (FDP) and member of the finance committee. In this respect, the accusations against Scholz hit a sore spot.

A true professional should not allow the massive falsification of balance sheets under his supervision, and one can hardly be called meticulous if one keeps quiet about meetings with accused bankers. “It can damage him politically because the narrative planned for him as a candidate suffers,” Toncar told EURACTIV Germany.

In the Wirecard case, a committee of enquiry is expected to clarify the political responsibility from October. For Scholz, it is particularly unpleasant to sit before a committee of enquiry as he prepares his candidacy for the chancellorship.

In the Warburg case, a committee of enquiry is also being prepared, though not in the Bundestag, but in the Hamburg parliament, where the process of setting up of such a committee has so far been blocked by the CDU/CSU, which is in opposition there.

Wirecard scandal: Bundestag inquiry committee increasingly likely

A probe into the Wirecard affair is picking up speed. At a special session of the Bundestag Finance Committee, MPs have questioned top ministers and lobbyist influence over the government is becoming increasingly clear. Setting up a special inquiry committee is becoming more likely as a result. EURACTIV Germany reports.

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