Wirecard Scandal Is Now Part of the Post-Merkel Power Play

(Bloomberg) -- The Wirecard AG scandal is taking center stage in efforts to grab control of the post-Merkel era.

Maneuvering ahead of next year’s election will play a critical role when a German parliamentary committee takes a break from its summer recess to grill members of Chancellor Angela Merkel’s cabinet later on Wednesday about the accounting scandal that brought down one of the country’s biggest tech companies.

Finance Minister Olaf Scholz, the top Social Democrat in government, will be the primary target over the failure to pursue warnings about the payment company’s books.

He’s in pole position to lead his party in the vote in fall 2021 and has the most government experience of any potential contender to succeed Merkel. That makes him a legitimate threat even if the SPD are currently mired in a distant third place in the polls.

Scholz went on the offensive Wednesday, appearing on national television to address Wirecard and questioning why auditors didn’t detect wrongdoing at the company over a period of 10 years.

He unveiled proposals last week to strengthen Germany’s oversight by bolstering financial regulator BaFin’s enforcement capabilities and scrapping a two-tier system that splits accounting supervision between a private-sector watchdog and the regulator.

“We have to get an exact understanding of what happened and it seems ever clearer that it’s not sufficient even when everything is done according to the scope of the law,” Scholz said in an interview with ZDF. “That’s why we need new, stricter, more severe laws. Everything must be closely examined.”

The closed-door hearing of the finance committee, which will take place in a backroom of the glass-domed Reichstag in Berlin, will likely spur a deeper investigation that could last well into 2021 and overshadow early stages of the election campaign.

Members of Merkel’s party won’t openly call for a parliamentary probe, which involves public hearings that would keep the affair in the spotlight, but they’re quietly egging on the opposition in order to undermine Scholz, according to a lawmaker from the Christian Democrats, who asked not to be identified because the discussions are confidential.

With Merkel planning to step down next year after 16 years leading Europe’s biggest economy, Germany’s political future is wide open. The CDU and the SPD have been squeezed by the rise of the environmentalist Greens and right-wing Alternative for Germany.

While Merkel’s Christian Democrat-led bloc is leading in the polls, just a year ago they were neck and neck with the Greens, showing how quickly the mood can change. More upheaval is likely as her conservatives battle over their own candidate -- a three-way contest between moderate Armin Laschet, pro-business conservative Friedrich Merz and Bavaria’s rising star Markus Soeder.

Scholz shined during Germany’s efforts to counter the coronavirus fallout, pushing for aid to families and a fund to invest in stricken companies. He is by far the most popular SPD politician -- 42% of voters view the 62-year-old former Hamburg mayor as best suited to run for chancellor, according to a Kantar poll for the Funke media group.

Merkel’s vice chancellor, whose ministry oversees BaFin, has come under pressure after it was revealed that his deputy Joerg Kukies had at least two meetings with Markus Braun, the former Wirecard chief executive officer who has been arrested by German prosecutors. Kukies regularly briefed his boss about developments of Wirecard probes.

At the hearing late Wednesday, Scholz and Peter Altmaier, the economy minister from the CDU, will testify to the 41-member committee. Altmaier is mainly there at the SPD’s request, with the purpose of deflecting attention.

‘Common View’

“The common view is that Scholz bears the main responsibility for the Wirecard scandal,” Cansel Kiziltepe, an SPD lawmaker on the committee, said in an interview with broadcaster ARD. “We see it differently,” because the economy ministry supervises auditors.

Mounting pressure prompted Merkel’s office to take the unusual step of unveiling a time line of contacts with Wirecard. The optics aren’t flattering.

Her office maintained regular contacts with the company, and Merkel herself promoted Wirecard’s efforts to gain a Chinese license during a state visit in September 2019. Her office was informed of inquiries into allegations of market manipulation just prior to the trip but denied that she was aware of the possibilities of “severe irregularities” at Wirecard at the time.

“The Wirecard scandal is becoming bigger and bigger,” said Katja Kipping, head of the Left party. “We have only seen the tip of the iceberg,” she added, calling for Merkel to testify as well.

An alliance of the Left, the Greens and the liberal Free Democrats would have enough votes to call for an investigation committee after the summer break.

But unless new revelations come to light, the chancellor has little to fear because her engagement for Wirecard was about opening up the Asian market to German companies rather than a company-specific issue, a person familiar with the matter said.

Scholz, meanwhile, is in the thick of it. Under his watch, BaFin failed to uncover irregularities at Wirecard. That has prompted officials in the finance ministry to try to limit the damage, a person with knowledge of the matter said.

In a hint of how the scandal is straining the coalition, Hans Michelbach, a lawmaker from the CDU’s Bavarian sister party, blasted the plan as merely “cosmetic” and insufficient to thwart a new Wirecard-like disgrace.

“The probability of a parliamentary investigation has risen in the past few days because of new relevations which continue to raise more questions,” Danyal Bayaz, a lawmaker from the Green party, told Bloomberg. “Our decision will depend on the willingness of the government to answer our questions fully.”

©2020 Bloomberg L.P.