Guten Morgen!

Welcome to another edition of the Krautshell! This week, our guest contributor Dr. Steven E. Sokol examines several recent summits and the chances of Germany taking more of a leadership role moving forward. In addition, our main articles look into possible changes in the EU’s General Data Protection Regulation, Italy’s newest political intrigue and the questionable practices of German electricity companies. Finally, enjoy Anna tackling some of Germany’s cultural challenges when it comes to digitization. Have a great weekend!

Anna                                Christian

Data Protection in Europe: Winds of Change a-Blowin’? 

Ah, the General Data Protection Regulation (GDPR). Maybe not the sexiest name, but definitely the poster child for what political scientists call the “Brussels effect”. Few regulations have had as deep an impact on European society and beyond. It was a major disruption back in 2016 and now the buzz in the EU bubble is that another change might be on the horizon. Here are some insights we gathered from this week’s happenings. 

At the core of this topic is the question of whether GDPR, passed in 2016, still fits today’s digital landscape. If you ask Member of European Parliament Axel Voss (EPP), his answer is no (explained in this 31-page position paper). At an event in Brussels this week, Voss gave off some (at least in Europe) unpopular soundbites like “we won’t win any competitions if we keep insisting that personal data should not be processed.” Although a little more mild, European Data Supervisor Wojciech Wiewiórowski echoed Voss’s opinion at the EU Digital Summit that an update is desirable – specifically regarding cooperation in data transfer, both inside and outside the EU. Ben Brake, the go-to-guy for data policy in the German Ministry of Digital Affairs (and formerly a government affairs director at IBM), touched on this same topic in a panel discussion on Wednesday. His position was there is nothing wrong with Europe’s high level of data protection, but these high standards should not stop Europeans from collaborating with areas of the world with more lax regulation. Meanwhile, if you ask the European Commission, everything is a-OK. Lucrezia Busa from Justice Commissioner Reynders’ cabinet defended GDPR, insisting that the regulation is flexible enough to account for new technologies, and successfully mitigates risks for the citizenry – which is her number one MO. We’ll be sure to update you if anything is set in motion, but until then feel free to ping us for more insights. 

Italian Instability – A Never-Ending Story 

Were it not for the fact that Italy is the EU’s third-largest economy, the latest Roman political intrigue probably wouldn’t receive too much attention. After all, https://www.economist.com/the-economist-explains/2021/01/31/why-does-italy-go-through-so-many-governments (that’s one every 13 months – take that, Weimar Germany). The latest is unelected technocrat Mario Draghi of European Central Bank fame, who has been ruling an unwieldy left-right coalition since his installation in February 2021. “Super Mario” yielded to pressure to leave the Madrid NATO Summit this week after being accused of pushing for the ouster of Giuseppe Conte, head of the populist Five Star Movement (M5S) which is part of the current government. This comes after a major split in the M5S on the issue of weapons deliveries to Ukraine: Since party leader Conte opposed military support, Foreign Minister Luigi di Maio quit the party but stayed on as minister anyway – a “problematic” development, as the far-right League far too eagerly pointed out. You get the idea: it’s complicated. 

What does this mean for Italy? Should this mésalliance of government fall, next June’s scheduled general elections will be pulled forward. So far, so… Italy. What comes after that is in the stars. While the center-left Democratic Party (PD) handily won last week’s local election run-offs, it is the political right which increasingly commands the political landscape. Georgia Meloni’s Brothers of Italy poll highest among parties, and a combined front with League and Forward Italy would probably sweep the political field. But there is no united right, much as there is no certainty that “Super Mario” will fall. After all, Italy’s political system has proven remarkably adept at keeping the far-right out of the Palazzo Chigi. As Berlin and Brussels keep their fingers crossed for Draghi, this much is certain: Italy is facing a political showdown soon, one way or another. 

Robber Barons, but Electrify it 

As of July 1st 2022, the so-called Renewable-Energy-Sources-Act surcharge (yes, we love long words and hyphens, but for short we also say “EEG surcharge”) will be abolished in Germany. In short, the EEG surcharge, paid by consumers, was used to finance the expansion of renewable energy sources in the country. Going forward, this will be financed by a special fund (don’t worry, we also haven’t achieved the energy transition yet).  

These days, one shudders a bit in Germany when it comes to passing on government rebates or tax cuts – keyword: fuel rebate. However, the electricity companies are required by law to pass on the savings from the elimination of the EEG surcharge. Therefore, we were shocked to find out (or not, what did we actually expect?) through research results from the podcast “Lage der Nation” (transl. “State of the Nation” – as humble as it gets) that most companies had already increased their prices on June 1st or announced to do so on August 1st.  And, of course, to a greater extent than the relief. An anonymous, senior employee of a large German electricity company confirmed this practice. “Well, electricity has become more expensive,” some of you may now (rightly) remark. The whistleblower also commented on this: a large part of the electricity sold today and over the next few months was purchased years ago at low prices. The price increases now are thus nothing more than pure profit-making for the companies. According to the informant, the internal strategy can be described as follows: “Due to the current situation, all consumers fear higher prices and are therefore not surprised when we charge more. This should be exploited.” 

This information cannot yet be confirmed with complete certainty, but according to the price comparison portals, there are some indications that speak in favor of this practice. However, it’s really a slap in the face for already struggling consumers.  

Source: Statista

by Dr. Steven E. Sokol

Symbolism and Summitry  

As world leaders and other senior government officials gathered for multiple high-level meetings in Europe during the second half of June, there were many symbolic moments – but will the symbolism and summitry result in concrete action? The jury is still out on how much has actually been achieved, but the show of unity and resolve were on full display.

Setting the Stage 

In mid-June, German Chancellor Olaf Scholz, French President Emmanuel Macron, and Italian Prime Minister Mario Draghi, as well as Romania’s President Klaus Iohannis traveled to Kyiv. This was the first visit by the heads of the EU’s three biggest economies to Ukraine since Russia’s invasion on February 24th – and it carried huge symbolic weight. 

After months of discord, for Scholz this was a critical turning point in Germany’s relationship with its eastern neighbor. He had been reluctant to travel to Kyiv until there was a concrete reason to do so. It is fair to say that the visit helped pave the way for the European Union to adopt Ukraine (and Moldova) as candidates to join the EU. In the run up to the EU Summit, while in Kyiv Scholz gave his first public statement in support of Ukraine’s candidacy – going so far as to say that “Ukraine belongs to the European family.”

The Summits 

Just days after the visit to Kyiv, at the EU Summit in Brussels on June 23, the 27 European heads of state unanimously approved the official candidacy of Ukraine and Moldova for EU membership. The leaders described this decision as “historic”, a “big victory for Ukraine” and a “good day for Europe.” While positive, it happened at the consternation of the Western Balkan countries whose respective bids to join the EU started over a decade ago. 

At the G7 Summit in the Bavarian Alps days later, Russia and the war in Ukraine were top of mind. G7 leaders underscored their commitment to Ukraine – but there were no major new announcements on how to support Ukraine. They did, however, agree to look at the feasibility of imposing a cap on the price of Russian oil and possibly gas. 

Later in the week the NATO Summit in Madrid proved that the alliance is alive and well after languishing for decades. In an historic move, after Turkey agreed to lift its veto, Sweden and Finland are set to join NATO. 

Taken together, these summits have shown tremendous resolve and unity vis-à-vis Russian aggression. The potential enlargement of the EU and the likely enlargement of NATO are a direct result of Vladimir Putin’s miscalculations and a consequence of his devastating war on Ukraine. But, these important gatherings fell short in addressing key global security issues that have been exacerbated as a result of the war in Ukraine – such as food security and climate change. Tons of grain shipments remain in silos in Ukraine because Black Sea access routes are blocked. The evolving energy crisis seems to trump long-term climate concerns as countries fall back on fossil fuels as a “necessary response” to the current crisis. And there is continued concern about gas shortages later in the year which could cause significant economic and social disruption.

Where’s Olaf Now? 

Earlier in his time in office, pundits asked “Where’s Olaf?” because Olaf Scholz was conspicuous through his absence. He is still finding his way on the international stage. The G7 summit was the first big international event hosted by Scholz since he took over from Angela Merkel as Chancellor. The trip to Kyiv gave him good visibility. He was able to deliver a message of unity. And, if he is seen as a facilitator and deal-maker, it will help his standing – at home and abroad. But the EU 27 are not fully aligned on Ukraine, and questions remain about Germany’s reliability and credibility. As ever, the devil is in the details… 

The (Guest) House’s View 

The fundamental question for Germany, for Europe, and for the transatlantic partnership is this: Is the new German government ready – and willing – to assume a leadership role on the world stage? 

The pessimist in me worries that Germany might not rise to the challenge. But, if not now, when? 

The optimist in me says that following these summits Scholz is poised to fulfill the aspirations laid out in his Zeitenwende speech in late February immediately after the Russian invasion of Ukraine – and he has support from within his party. In the midst of all the summitry, on June 21st Lars Klingbeil, the Chairman of Germany’s Social Democratic Party (SPD), gave a keynote speech (which was adapted for an English-language audience here). Drawing on the legacy of Social Democratic Chancellors Willy Brandt and Helmut Schmidt – who understood that military strength and capability are part of the foundation for a powerful “peace policy” – Klingbeil argues that Germany must aspire to be a Führungsmacht and does not shy away from talking about national interests. Russia’s war in Ukraine requires that Germany take on a leading role – and that the European Union becomes a stronger geopolitical player. 

Let’s hope that leaders like Scholz and Klingbeil can convince the German public that the world order as we have known it is undergoing a fundamental change and that they can make the case for German leadership. Without it, the symbols and summits won’t matter. 

• Show me Your Crypto: This week, the EU reached a provisional agreement on increased transparency for transfers in crypto assets. Essentially, in its current form, the regulation would require crypto asset providers to make accessible certain information about senders and receivers of crypto assets for anti-money-laundering purposes. 
• No. More. Heets: Much like the FDA went after Juuls last week, the European Commission has also declared war on nicotine products. Specifically, this week the European Commission said it wants to prohibit the sale of flavored heated tobacco products – this comes as a response to heated cigarette sales jumping 2000% in just 2 years. 

• Putting on the Brakes: In a win for Minister of Finance Christian Lindner, the German Federal Cabinet approved the government’s draft for the 2023 budget. After three years of emergency high levels of spending, this budget is back within the famous “debt brake” to limit inflation. Instead of borrowing money, the Federal Government is to dip into its own reserves. 

IT DOESN’T GET ANY MORE GERMAN   

In June 2019 the EU agreed on a Directive for Transparent and Predictable Working Conditions. The directive regulates what the title indicates, things like the right to be more informed about the workplace tasks, the length of probationary periods or exclusivity clauses. Nothing too exciting overall. 

2022 was the deadline for the member states to transpose the directive into national law. Now, 2022 has arrived and Germany took up the task – the last reading of the national implementation happened last week. And I am literally dumbfounded. 

You might know that directives do allow for some leeway when being implemented in the member states.* And Germany jumped on that opportunity: Despite the ambition to digitize its public sector, despite the goal of reducing bureaucracy, despite the objective of becoming more climate-friendly, and in light of more and more workers being hired remotely, in all seriousness the governing parties plan to INTRODUCE the requirement for hard copies, aka paper, for work contracts (and other relevant information). Not only will they become mandatory, but there will also be fines if an employer decides to stick to a digital format. 

And what were they thinking, you might ask? 

1. Better access to important information
   (Sure, because there are still tons of people without access to a computer.)
2.  Needed as admissible evidence if they should end up in court 
   (Except that courts have been accepting digital formats for years)
3.  … well, nope. That’s it. 

One of these arguments is idiotic while the other one is plain wrong. Now, when the law passes, the 10 % of companies which until today were sending work contracts digitally will have to get themselves a printer. Kudos to the traffic light coalition. 

*as opposed to regulations, which are just effective 1:1