Guten Morgen!

Entering the Christmas season, we wish you a wonderful start into your weekend and week with the newest Krautshell edition.

Enjoy and ping us for more!

Anna                                Christian

The Future Is Transatlantic

This week, we had a look at an EU Council document drafted and discussed by several Council working groups. It focuses on the transatlantic relationship between the European Union and the United States. With this document, the EU Council defines its view on the importance of the transatlantic relationship. This means, there are many nice sounding sentences and phrases to be found in the text (“reaffirm the strategic importance”, “shared values and common interests”, “geopolitical reality”, “bedrock of the rules-based international order”). Goosebump potential only shortly before Christmas. Furthermore, the document lays out shared priorities (from the EU’s point of view) like combatting climate change, settling trade differences, security policy and deepening of economic relations.

What’s behind that? The transatlantic relationship is undoubtedly part of the EU’s identity. However, in the past years, especially with President Trump as a counterpart, the EU struggled to find its role in this relationship. With past Presidents, the EU could always count on the US as something like a big brother (not talking about the surveillance thing, more like an actual big brother) and there are probably still people who want to return to the way relations were back in 2010. The reality, of course, is different. The EU now finally has the chance to take an active role in the transatlantic partnership. Also, Joe Biden’s reaffirmation of the importance of that partnership is most likely a strategic move, as he stated: “We are waiting for you, but this time we will actively shape the common projects”.  The coming months and years will show whether the EU is capable of taking a new role in the relationship. It certainly should.

Some CEOs, a Minister of Economics, and a Commission President Walk into a Digital Summit…

This past week, several thousand high-ranking representatives from business, politics, trade unions, science and civil society came together digitally at the 14^th Digital Summit organized by the Federal Ministry of Economics and Energy.

Quite interesting and impactful were talks from executives of companies closely involved with the ongoing shared European data infrastructure initiative, Gaia X. SAP CEO Christian Klein jumped in on the action, pointing out his company is working together with BMW on an open B2B data platform specifically for the automotive industry called the Automotive Alliance. More data means more innovation, and more innovation means new business models in line with the EU’s green goals. Which German automotive companies need to survive. That being said, the relationship is definitely not one-sided. Survival of the shared data initiative also hinges upon participation by large automobile manufacturers like BMW. Without these companies and the star power (and data) they bring to the table, it would be hard to convince other actors to join.

EU Commission President Ursula von der Leyen also made an appearance at the Summit, bringing with her lots of enthusiasm and hope for Europe’s green and digital future. She pointed out the funds to support green projects (driven by digitization) are there, but now individuals and companies need to actually go out into the world and come up with creative ideas. So, you heard her – go get that bread!

The Standards of AI’s Past, Present, and Future

This past week, the Federal Ministry of Economics and Energy (BMWi), together with the German Institute for Standardization and other industry associations presented a 200-page roadmap for AI standardization. Yes, because as Germans we even plan the future of AI. Like any decent plan, it gives an overview of where we currently stand, where we want to go, and what challenges we might face along the way. The roadmap looks at various use-cases in AI like AI in medicine, IT Security in AI systems and industrial automation, and results in five overarching recommendations for action. These recommendations for standardization should ultimately bolster trust that evil robots won’t take over the world (after reading this article we’re not quite sold yet…).

Jokes aside, creating across-the-board standards for AI development and use cases is a first crucial step towards using AI in everyday life and reaping its benefits. For example, we would want our AI systems to meet a basic security standard, or build a series of standardized checks to ensure our AI systems don’t have built-in biases (as addressed in this documentary which, among other things, talks about racial bias in facial recognition AI software). The BMWi’s roadmap will continue to be updated as requirements change and innovation occurs. The next step will now be to find experts across various industries to actively implement the recommendations and adjust where necessary.

A Strong Democracy Defends Itself

This Thursday, the EU Commission presented its Democracy Action Plan. Just FYI: in the EU, an action plan is like a declaration of intent and lays out legislative priorities for coming years. At the heart of the Democracy Action Plan is a planned regulation which will focus on online political advertising. This is a paradigm shift in the EU as this topic was always subject to national law. With further integration of the Single Market, however, the EU officials argue that leveling the playing field, also for political advertising, is justified. Practices like microtargeting (we reported) could be banned, which would decrease the chances of success for companies intending to become a Cambridge Analytica 2.0.

A shift towards more extreme (mainly right-wing) positions, conspiracy theories and other nasty stuff can be seen in nearly all Western democracies. The EU felt that, so far, they were doing quite well. Still, weaking of the judiciary in Member States like Poland and Hungary, the Brexit referendum in the UK, and the rise of the German right-wing party AfD show that also EU democracies are not immune to radical parties spreading misinformation. A strong democracy needs to be able to defend itself against radical attacks. These attacks usually happen via the internet, using misinformation to influence election outcomes. This is why the intended regulation will be the centerpiece for promoting democracy in the EU. The plan is to adopt the regulation in all Member States before the next EU elections in 2024.

Yes, Another Action Plan

Consultants definitely had a busy week in Brussels. It felt a bit like a “buy 1, get 1 free” discount when the EU also issued its action plan for “Media in the Digital Decade”, except that of course they had to prepare summaries and impact assessments for both (more like “buy 2 but please provide a summary until COB – Thank you!”). The two action plans are strategically intertwined, at least in some respects. Basically: if you fight misinformation on one hand, you should also strengthen independent information and good journalism on the other. The media sector was hit hard by COVID as it lost quite a bit of its revenue sources and simultaneously had to do quite some overtime to keep us informed (we have to give credit where it’s due).

The Commission intends to facilitate the access to financing for media outlets and give incentives for investments to innovate media and also (of course) make it more environmentally friendly. Furthermore, an industry coalition is planned that should give media outlets better access to augmented and virtual reality programs that would certainly spice up the evening news. The media is a central part of a democratic union like the EU. It has to be attractive, so “alternative” news formats like your uncle Peter telling people on YouTube that vaccinations cause autism become less appealing, format- and content-wise. If you want to read the ten actions the EU Commission plans to implement, you can find the document here.

Insolvency Is Coming

One political reaction to the pandemic in Germany was a temporary exemption of the obligation for companies heavily indebted by the Corona crisis to file for insolvency. This exemption ends once 2021 begins. Then, new insolvency and restructuring regulations will come into play. Without boring you with too much detail: opportunities to prevent insolvency will be extended through new restructuring measures.

What’s problematic about that? Bankruptcy declarations are at a very low level right now despite the Corona pandemic. That doesn’t necessarily mean that German companies are doing extraordinarily well. What it certainly means is that state aid and state-backed credits for SMEs are effective. What could happen now is that companies still in financial trouble, who used state-backed loans and, as a result, didn’t need to file for insolvency can now “restructure” their debt under the new framework and avoid filing for bankruptcy once again. In the end, this could mean facing an avalanche of insolvencies that have, until now, been artificially prevented. And now for the million-dollar question: who would have to pay in this situation? If you guessed the taxpayers, you are absolutely right! All of this is still not certain, we cannot predict the “real” economic situation after the crisis. It could be that companies recover well, and the avalanche is not coming. But, it is also possible that the government will have to save a lot of companies that are already dead men walking but we just don’t see it yet.

• The next CDU leader and maybe-Chancellor: In January, we await a decision for the next leader of the CDU party and thereby probably the CDU’s candidate for Chancellor. Currently the polls read 33.4% for Friedrich Merz, 12.7% for Armin Laschet (negative surprise) and 27.4% for Norbert Röttgen (big surprise). Just keep in mind though, these polls surveyed “ordinary” citizens who aren’t the delegates voting at the CDU party convention. There, the situation might look different. To understand why Norbert Röttgen’s result is such a surprise, why people compare him with George Clooney and what all of this has to do with Koalas, we recommend you read the What’s On Our Minds by Christian.

• BioNTech Founders To Become Billionaires: Ugur Sahin and Özlem Türeci, the founders of the German company BioNTech, are now part of the 500 richest people in the world. Their shares of the company BioNTech are worth around $5 billion after they developed a promising candidate for a COVID-19 vaccine which was already approved in the UK – the EU and US are expected to grant their approval in the upcoming days.

• Christmas Alone: This could be reality in Italy this year. The country, which was first hit by the Corona virus in Europe, just announced strict rules for Christmas. You are not allowed to leave the municipality you are living in, also not to visit your family over Christmas. You can only see them if you live in the same area. Italy experienced every horrible scenario you could think of in connection with the Corona virus and fear regarding a possible third wave due to extensive holiday travels is high.

Because, who doesn’t like Koalas?

When outsider candidates run for office and gain ground in polls, like Norbert Röttgen did (see Long Story Short above), they would normally try to build momentum and get completely fired up like

Not him. Instead, Röttgen, who was not taken seriously as a candidate and became subject to mockery (e.g. as “George Clooney of German Politics”) reacted to the polls with a re-tweet of a koala bear picture, saying: “I like Koalas!” ….yes, really.

Let that sink in for a minute and then tell me: How would your social-media consultants have looked when asked if THIS would have been an advisable tweet for a candidate reacting to polls? Right, like

But his tweet went viral, harvesting sympathy across party lines. Just like a video showing him playing with a ball in his Bundestag office when he wasn’t aware he was being filmed. His solid career and interviews on US-elections surely helped boost his popularity. However, now he is a star on the web and celebrated for his social-media strategy. So, whoever will be the new party leader, Röttgen can hardly be ignored for higher offices. Lesson: When you are among the few politicians outperforming yourself in the polls, use your momentum to make everyone smile a little. Outcome: On top of looking a bit like George Clooney, the public is also starting to look at Röttgen a bit more like