Guten Morgen!

We wish you a wonderful start into your weekend and week with the newest Krautshell edition.

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Anna                                Christian

CDU – Corrupt, Dubious, Unfaithful?

The CDU, Germany’s longest governing party, the party of Chancellor Angela Merkel, might be in its biggest crisis since the contributions scandal of former Chancellor Helmut Kohl in the late 90s. We reported about the alleged “mask deals,” in which MPs allegedly served as brokers for mask manufacturers. Well, so far three MPs of the CDU/CSU had to resign and further investigations are ongoing. Parliamentary group leader Brinkhaus demanded a statement from every MP about whether he or she had conducted any pandemic-related business and made money from that – a measure never seen before. This forms a solid crisis at the beginning of a “super election year” in which not only federal, but also many state elections will take place.

The CDU has never been a party that got elected for high moral standards. For the CDU, it was often enough that German public was confident that their politicians are the ones best suited for running governments. Only sometimes big ideals, values or even visions were needed to win elections. The current scandal comes during a time in which the public is not pleased with the CDU/CSU’s crisis management and this is why the scandal might damage the party more than former ones. Questions are being raised why corruption is such a prominent issue in the party, whether the party’s structures actually promote immoral behavior more than in other parties. We won’t be able to give an answer to that. We can certainly say that the CDU will be punished at the polls for what became public the last week(s).

The FDP – Liberal, Innovation-Friendly and a bit Green

It’s election year and from time to time we will present you a new campaign program. This week, we were able to have a look at the draft version of the FDP, the “Free Democratic Party of Germany,” often referred to as “The Liberals” (in a European sense, not like AOC-liberal). The program contains reform programs for the EU, the current tax and finance regime, social and labor politics and, of course, education. For all areas, the FDP aims for more ambition and progress. Companies should pay less taxes to enable more investments, immigration should be strengthened to master the demographic change, the EU should have its own security policy and climate politics has to be both ambitious and based on market economy principles.

In US politics, FDP politicians could be either Democrats or Republicans. The party is exciting because it incorporates several political streams which are all based on the foundations of liberalism. Some might put more weight on economic liberalism (the Republican side) while other might find social liberalism more important (the Democrats). This makes the FDP traditionally open for coalitions with the CDU/CSU on one side and the SPD and/or the Greens on the other side. Currently, it looks like (and the program reads like) the FDP hopes for a re-establishment of FDP-SPD relations (needing the Greens to achieve a majority). The coalition of SPD and FDP led the German government once under Chancellor Willy Brandt, certainly a time both parties like to remember. Greens, FDP and SPD could become a real opportunity for the federal level as this coalition also works already in the federal state of Rhineland-Palatine. Just ping us for more insights about the FDP program.

Wirecard Scandal: The Saga Continues

This week, if you’re Olaf Scholz, Germany’s Finance Minister and Chancellor candidate for the SPD in the upcoming federal elections, you’re slowly starting to feel the heat. On Wednesday, lawmakers on the parliamentary committee to investigate the details of last year’s Wirecard scandal announced plans to question both Chancellor Merkel (CDU) and Olaf Scholz. So far, the investigation has already claimed several high-ranking “victims,” including the German Chief of the financial auditing firm EY, and the President and Vice President of BaFin, Germany’s Federal Financial Supervisory Authority. The trio of head investigators, consisting of representatives from the Left Party, the Green Party, and the FDP have made it clear they suspect some sort of foul play on the part of public authorities.

Where exactly the foul play took place is still very much disputed. That being said, various politicians have thrown their two cents in to try and pinpoint the problem. Fabio de Masi (Left Party), one of the three chief investigators, pointed out that fraud of this magnitude requires a network of actors, and that no single person could have carried it out alone. According to FDP politician and member of the investigatory committee Florian Toncar, they are taking a closer look at Scholz’s State Secretary Jörg Kukies (SPD), for his involvement in the short-sell ban imposed on Wirecard stock by BaFin in 2019 and possible withholding of information. For many, this puts Scholz’s Finance Ministry and BaFin “on the side of the criminals.” Meanwhile, politicians from Scholz’s own party, like Jens Zimmermann, member of the investigatory committee, are pointing fingers at the financial auditing firm EY, who waved through Wirecard’s balance sheets for years. Questioning of these high-profile politicians begins in April, so stay tuned to find out what happens.

Pre-Election Analysis: What Can We Await from this Weekend?

This Sunday, the first two German state elections will take place in the federal states of Baden-Wuerttemberg (BW) and Rhineland-Palatine (RP). The former was once a true CDU stronghold, a conservative state with a powerful countryside – which has now been governed by the Green Winfried Kretschmann for nearly ten years. It’s the only German state with a Green Minister-President. Winfried Kretschmann is the guarantee for success for the Greens in Baden-Wuerttemberg. Even half of CDU members in BW said in a survey that they would prefer him as Minister-President over their own candidate. Ouch! But this in turn also means that the success of the Greens in Baden-Wuerttemberg might not really be an indicator for the success of the party on federal level. The effect of the candidate is too big, and the state faction of the party is more conservative than the party in the rest of the country.

In Rhineland-Palatine, the SPD has been the strongest party for AGES. This state is a true pain for the CDU. For the first time in years, it looked like the CDU challenger might have a chance against Minister-President Malu Dreyer. Well, then the corruption scandal became public and now the SPD confidently leads the polls again. Lucky for them! Winning RP would be a success desperately needed for a weak SPD in this super election year. Especially as they will likely come in 4^th in Baden-Wuerttemberg. For the CDU and their new leader Armin Laschet the whole situation is bitter. Sunday is likely to produce two disappointments. On top the corruption scandal. This could have implications for the question if Armin Laschet can become Chancellor-candidate or whether he has to leave that role to sister-party leader Markus Söder (CSU). We will report to you about the election results next week.

Clean Up Your Supply Chains

On Wednesday, the European Parliament (EP) sent a very clear message to the Commission: hold companies accountable for the entirety of their supply chains. With a vote of 504 in favor, 79 against, and 112 abstentions, the EP passed a legislative initiative report which calls for a binding EU law that companies are held accountable and liable for harming (directly or indirectly) human rights, the environment, and good governance. Furthermore, the initiative calls for facilitated access to legal remedies for victims of malpractice.

The initiative came in response to the scattered landscape of inefficient regulations and voluntary schemes that currently exist for companies to monitor their supply chains. This lack of a uniform, EU-wide approach means that companies who proactively monitor their supply chain for environmental or human rights violations are at a competitive disadvantage. Furthermore, there are also clear signs the current voluntary monitoring mechanism is largely ineffective. A report by Greenpeace showed that multiple products linked to environmental destruction, land disputes, and human rights abuses were labeled as “sustainable” by the EU. Not a great look. That being said, there are still some unanswered questions to be addressed, such as what to do about SMEs? While it’s easy to hold large companies accountable for their supply chains, some SMEs may not have the resources to do a thorough supply chain analysis. The German mechanical engineering industry association (VDMA) has stated that compliance tasks for expert-oriented SMEs should be “kept within limits,” while Socialist MEP Lara Wolters pointed out that small companies can cause harm too.  The Commission is well-aware of the pressure coming from their Parliamentary neighbors, and Justice Commissioner Didier Reynders has stated he will bring forward legislation in Q2 2021.

The EU’s Attempt at Democratic Agenda-Setting: Conference on the Future of Europe

After months of back and forth, the European Institutions have agreed on a starting day for the Conference on the Future of Europe: May 9^th, 2021. While the title may evoke images of a stuffy conference hall, filled with politicians giving vague, encouraging speeches at a slightly-bored audience, the actual event is quite unique. The idea is to launch a discussion forum meant to give EU citizens an opportunity to directly contribute their ideas to the EU’s future, both short- and long-term. Within this framework, the institutions will organize multiple in-person conferences, as well as a multilingual digital platform to facilitate debate. It also seems like Europe’s citizenry is on board with the initiative; according to a survey from Eurobarometer, 92% of respondents across all EU Member States want their voices to be heard more regarding the future of Europe.

Originally, the conference was planned for May 2020, but internal disputes among the different EU institutions delayed the event by one year. The problem: Member States, the Commission and the Parliament could not agree on who the conference’s chairperson should be. Yes, really. Topics to be discussed include the Green Deal, the digital transition, and European elections. The conference is to last two years, and whatever views are brought forward by the mix of politicians and citizens will be presented as recommendations following its conclusion. We’re excited to see what ideas spring up from this initiative.

• Another One: The European Medicines Agency recommended the admission of the Johnson & Johnson Corona vaccine. The Johnson & Johnson vaccine would thereby be the fourth vaccine which has an admission in the EU and in Germany. We are thrilled!

• “Expertise Needed” … was obviously the motto of the German government. The spending for external consultants increased by 46% in 2020 compared to 2019. This means, the government spent more than €430 million on consultants. Noteworthy: nearly half of the costs were created by the Federal Ministry of the Interior (€204 million). Most frugal was the Federal Ministry for Labor and Social Affairs (€698,000).

• Spain leading the way: This week, the Spanish government announced a deal that will classify individuals working for delivery companies like UberEats and Deliveroo as salaried staff, getting to enjoy all relevant protections that come with it. This could be the canary in the coal mine for the future of gig economy platforms in Europe.

Super Election Year, part I

You did it last year, now it’s Germany’s turn: Super Election Year! Not only do we have Federal Elections in September, but also State Elections throughout the year, starting this weekend: Baden-Württemberg and Rhineland-Palatinate are choosing new governments on Sunday.

And I know, you are probably thinking:

But, if you are interested in who will follow Angela Merkel as Chancellor, those elections deserve some attention. Baden-Württemberg is Germany’s biggest state by area (yes, there is Bavaria, but there are some disputes about them belonging to Germany ?), and, even more interesting, the only one governed by a Greens/CDU coalition under the leadership of a Greens MP, Winfried Kretschmann.

This weekend’s results will not only serve as a satisfaction referendum with the current state government, but also an indicator of where the CDU stands with voters on the federal level. And, after several CDU politicians resigned in the last week(s) over suspected corruption activities and morally questionable behaviors, you can expect a serious hit for the party in both states.

We will report on the results next week, but it seems 2021 is starting exactly like 2020 ended for the CDU.