Guten Morgen!

We wish you a wonderful start into your weekend and week – we certainly need some quiet time after all the excitement you can read about in the first article AND in our WOOM…Enjoy the newest Krautshell edition and ping us for more!

Anna                                Christian

A “Sorry” From the Chancellor

As a reader of the Krautshell, you probably know that Chancellor Angela Merkel and the German Heads of States are the ones holding the steering wheel in the Corona crisis. This week, they came together and decided: we need an Easter break because the third wave is coming and, you know, all that bad stuff. Their idea was at least one, but ideally two additional public holidays to reduce contact and virus spreading. Enter the lawyers: “That’s actually not possible.” Enter the public: “WHAT THE ACTUAL F*CK? Waiting lines in supermarkets are long on public holidays BECAUSE there are days on which supermarkets close! How do you expect lines to become shorter when you add MORE days of store closures?”

Then came Angela Merkel’s hour of reckoning. She publicly revoked the measures, stating that they were a mistake and that this mistake was fully her responsibility. She even apologized for the chaos. Certainly an honorable move. What’s left? Even though we applaud Merkel for her courageous move, the notion stays: we are experiencing a third wave, the vaccination campaign is as dynamic as a sloth and no one seems to know whether the newly established task force for vaccination and tests has delivered any results so far. Both frustration and infection rates are rapidly increasing in Germany. Let us all hope the Easter break can ease all of our minds, allow us to refuel and help us regain our optimism.

German Funding Initiative for Drones: A Very Mixed Bag

On Tuesday, the German Federal Ministry of Transport and Digital Infrastructure (BMVI) introduced a new funding initiative to advance innovative applications and concepts for drones. While many believe the program is a step in the right direction, overall reactions are still quite mixed. In total, the BMVI is making 11 million euros available for projects in research and practical applications for drones.

Compared to other funding initiatives from the German government, this one is relatively small. (For example, compared to this one for electric mobility). However, it isn’t the size of the fund, but rather the timing that makes this initiative interesting. Since the January 1^st, new EU drone regulations have come into effect, and the BMVI has put forward a draft law to integrate these regulations into German law. While on one hand, the BMVI is attempting to spur innovation and growth in the German drone economy through its funding, many in the industry believe the draft law in its current form does the complete opposite. For many companies, drones are increasingly becoming an attractive tool for a variety of use-cases. Whether it be for inspections, transport of medical supplies, or inventory, drones can increase process efficiency and decrease operation costs. However, overly bureaucratic flight approval procedures, seemingly arbitrary no-fly zones, and vague cost estimates for attaining flight authorizations in the current draft law are likely to scare off companies considering drone use. Overall, the funding initiative shows determination from the government to use drones as a driver of economic growth, but it remains to be seen if the legal framework surrounding these flying helpers will encourage the same. The law will be discussed in the Bundestag on April 15^th, so we’ll be sure to keep you updated.

Police Factory Raids and Export Controls: the EU’s Vaccine Troubles Continue

As far as COVID-19 vaccines go, the past week has been a cacophony of disasters in the EU. This story begins last weekend, when Italian military police entered a vaccine filling plant after Internal Market Commissioner Thierry Breton noticed vaccine doses weren’t adding up. There, the Italian Carabinieri found 29 million unreported doses of the AstraZeneca vaccine, commencing debates about their intended destination. Italian publication La Stampa claimed these doses were originally destined to the UK. AstraZeneca then countered these accusations by stating that 13 million doses were planned for low-income countries, and the remaining 16 million doses will go to Europe following the approval process.

This whole fiasco further deepens the mistrust between the EU and the British/Swedish vaccine manufacturer, and has prompted the EU to threaten an export control scheme. While it’s uncertain whether the EU will actually use the mechanism, on paper, the measures would allow the Commission to block the export of vaccines to countries with higher vaccination rates (cough cough the UK). EU politicians, like Belgian MEP Kathleen van Brempt (S&D), have spoken out against the mechanism, saying this move was ill-conceived. According to van Brempt, the EU sources 70 precent of its vaccine ingredients from other vaccine-producing countries, and companies like Pfizer/BioNTech depends on the UK for supplies. Therefore, a trade war at this time would be inadvisable. In an attempt to defuse tensions, the Commission issued a joint statement with the UK, stating the two sides would work together to find a “win-win situation” for both sides. As cases in Europe continue to rise, the EU is understandably doing what it can to limit the effects of the next wave of infections. That being said, for many, the EU’s approach to vaccine procurement leaves much to be desired.

Corporate Due Diligence: Industrial Allies not Pleased

In the first week of March, the German cabinet approved a law requiring companies to address human rights and environmental standards in their value chains (German: Sorgfaltspflichten-Ge-setz). In its current version, the bill can be understood as a compromise that satisfies neither business interests nor human rights or environmental groups.

This week, the topic was taken up again in Germany, as the generally industry-friendly CDU/CSU Parliamentary group and a confederation of large German industry players (28 industry associations) issued resolutions on the law in its current form. To put it simply: they are not happy. While both opinions have slightly differing specifics, the overall tone and messaging mirror each other quite strongly. The Christian Democrats take a political angle, stating they want to ensure a level playing field for German companies by calling upon the government to initiate a due diligence regulation on a European level. There might even already be something in motion here (see Krautshell from two weeks ago). Then, according to the industrial players, the current law is “completely unclear” regarding what the criteria for what qualifies as malfeasance through a supplier. Finally, both parties criticize the compromise for “unnecessarily” burdening small and medium-sized companies: from 2023 onwards the due diligence obligation kicks in when companies have more than 3,000 employees, and after 2024 for companies with 1,000 employees or more. The CDU/CSU wants to see these thresholds increased to somewhere between 5,000 and 10,000 employees. The law still needs to be voted on by the Bundestag, so we’ll be sure to keep you updated on how this regulation might affect your business. 

How To Safely Re-Open? We Try Pilot Projects!

Highs and lows are – as you all know – not far away from each other, especially when you are active in politics. The mayor of the German city of Tübingen, Boris Palmer (Greens), was the no-go man last year when he publicly doubted the sense of “saving old people that might die half year later.” Well, Palmer obviously learned from his faux pas and is now conducting a pilot project in his city: the citizens of Tübingen can visit restaurants, cafes, theatres and more (with a same-day negative COVID test), while the rest of the republic is closed. It is Germany’s most prominent pilot project for how to re-open and, so far, there seems to be negative impact on Tübingen’s infection rate.

For Palmer, politically nearly dead after his statements last year, the project is a huge success. Interest from other German cities on how to implement such pilot projects is high. The question now is whether Tübingen could serve as a role model for the whole country. Unfortunately, the biggest challenge here is still testing capacity. When extrapolating Tübingen’s test numbers per day for the whole country you would need more than six million tests each day which would cost €90 million if you want them to be conducted by medical professionals. So, we must wait. Still, cases like Tübingen seem to give German people hope at the moment that a bit of their “normal” life might be about to come back after months of various lockdowns.

China and the EU’s Sanctions Exchange

In December 2020, the EU revealed some details about the EU-China Comprehensive Agreement on Investment (CAI), and it seemed relations were on the upswing. The press release from the EU talked about closer cooperation, equal playing fields, and preventing backsliding. However, all this positive messaging seemed quite distant as both sides exchanged sanctions earlier this week.

On Monday, the European Union approved sanctions against four Chinese officials involved in the detention of Uyghurs in China’s Xinjiang Province. The Chinese then quickly followed suit by issuing its own sanctions on EU and Member State politicians, as well as a number of European think tanks and foreign policy experts. This new round of sanctions could also potentially derail the entire CAI. For adoption, the agreement must be passed in the European Parliament; the five sanctioned MEPs will most likely be lobbying their colleagues to reject the agreement. However, following these heated exchanges on Monday, it was surprising how the tone changed quite rapidly in the following days, almost implying business as usual. On Tuesday, China hosted a meeting of ministers from around the world (including from countries which it had just sanctioned one day before) to discuss climate policy. According to a Minister who attended the summit, there was “no signal of bad feelings” between the participants. I guess it’s comforting to know that even when the world’s superpowers are at each other’s throats, some issues are important enough to put the political theater aside for, even if it’s just for one meeting.

• Testing (not really) Optional: As many Germans plan on traveling for Easter break, the federal and state governments “expect all airlines to consistently test crews and passengers before the return flight.” Testing is still optional (but encouraged) in other industries, but if this does not happen, Finance Minister Olaf Scholz (SPD) said the government will follow up with a legal regulation at the beginning of April.

• Register Here, Please: The Bundestag and Bundesrat have agreed on a law to introduce a transparency register for lobbying the Federal Government. In addition to a registration requirement, lobbyists will be obliged to make specific information transparent to the public and accept a code of conduct that defines what it means to “lobby with integrity.” Ping us for specific questions.

• Is the Gang back Together again? This week President Biden called into a meeting with the EU’s 27 leaders, really hitting home the message that Washington wants to rebuild the transatlantic relationship. One common goal they all share: forging a strong, common front of democracies against increased authoritarianism by China, Russia, and co.

WHOOPSIE

Once again Chancellor Merkel met with the State Prime Ministers to discuss the pandemic. Once again, they agreed on an extension of the lockdown, this time until 18 April. Once again, Merkel was not fully satisfied, fearing an exponential rise in infections spurred on by Easter travel and celebrations. 

So, a new idea emerged and was quickly announced: In addition to the extended lockdown, we would introduce an even stricter lockdown over Easter, adding two additional public holidays to the already existing Good Friday, Easter Sunday and Easter Monday. Everyone, especially business owners were like:

You would expect decision-makers to have thought it through beforehand, but they seemingly were caught flat-footed when it turned out that not only federal legislation, but state legislation (times 16) is needed to introduce a public holiday. Not only did some of the states not agree on this measure anyways, but it was too short-notice, too expensive* etc etc.

After considerable uproar, what followed was a withdrawal of the announcement, accompanied by an apology by the Chancellor herself, who took full responsibility for the mishap and the chaos caused.

She got some appraisal for standing by her mistake. Still, this lapse added to the ongoing series of misfortunes the CDU is currently suffering through: Poor performance with the vaccination campaign and overall pandemic handling, more and more Members of Parliament involved in funny business and now the discovery that even our Chancellor is fallible. Wherever you stand on the political spectrum, you gotta feel sorry for them.

*according to some estimates, each public holiday costs the economy around 3.5 billion Euros.