Scandals overshadow German vice chancellor as he bids to succeed Merkel

FRANKFURT/BERLIN (Reuters) - Germany’s vice chancellor has come under renewed pressure from lawmakers over his handling of two financial scandals, hurting his chances of reviving his Social Democrats in the race to succeed Chancellor Angela Merkel next year.

FILE PHOTO: Germany's Chancellor Angela Merkel and Finance Minister Olaf Scholz are seen at the start of the weekly cabinet meeting at the Chancellery, in Berlin, Germany June 10, 2020. REUTERS/Fabrizio Bensch/Pool/File Photo

Olaf Scholz, the Social Democrat candidate for chancellor, gambled with the party’s center-left identity by joining a grand coalition with Merkel’s conservatives after the party’s worst post-war electoral defeat in 2017. He hopes to revive its fortunes in an election in which Merkel says she will not stand.

But his chance of succeeding her depends on a reputation as a social justice campaigner, which has been undermined by criticism of his handling of two of the biggest corporate fraud scandals in German history: one dating back years to a stint as a mayor, and one on his watch as Merkel’s finance minister.

Lawmakers say Scholz failed to reveal a series of private meetings he had as mayor of the city of Hamburg with the then chairman of the bank Warburg, at a time when the city was slow to claw back more than 40 million euros from a tax fraud.

Scholz has denied using his influence as mayor to slow down city officials demanding back the funds, owed after the exposure of the so-called “cum-ex” tax scam, in which fraudsters evaded billions of euros in tax by having two entities claim to own corporate shares simultaneously.

In a meeting with lawmakers, Scholz conceded that he had held meetings with the bank’s chairman, although he said he could not recall the details, according to people who attended.

A spokesman for Scholz told Reuters he had nothing to add about the affair beyond his previous public denials of wrongdoing. Warburg said it had since repaid 50 million euros.


“It is remarkable that a person of his intellect shows such enormous weakness to remember ... where the matter starts to get interesting,” said Florian Toncar, an influential member of the Bundestag from the pro-business Free Democrats.

Fabio De Masi, a lawmaker from the Left party, said he had asked Scholz in March this year about meetings he may have had with the bank.

“He said there was nothing more than what was already known. Now he admitted there were other meetings. Why did he hide this?”

In the other big scandal, Scholz has presided over the finance ministry during the collapse of the payments firm Wirecard, which went bankrupt after acknowledging that nearly 2 billion euros had gone missing.

Parliament has announced an inquiry to force the government to reveal more about inaction by financial regulator Bafin, part of Scholz’s finance ministry, in the run-up to the fraud. The government’s critics say the authorities ignored many red flags.

“Germany tried to portray itself as a country of honesty and efficiency,” said De Masi. “Wirecard and cum-ex are changing this perception.”

Additional reporting by Holger Hansen in Berlin and Tom Sims in Frankfurt; Writing by John O’Donnell; Editing by Peter Graff