(Bloomberg) — German lawmakers plan to grill officials from Angela Merkel’s chancellery, providing Finance Minister Olaf Scholz a temporary reprieve from deeper scrutiny in the ongoing political fallout from the Wirecard AG scandal.
Members of the lower house of parliament’s finance committee said they will need answers from Merkel’s office before deciding on a deeper investigation, as Scholz defended his handling of the issue and called for tighter financial oversight.
“We will not get a complete clarification because the chancellery’s chair is empty today,” said Fabio De Masi, a member of the committee from the Left party. Lisa Paus from the Greens also said that Merkel’s office needed to be questioned.
Scholz, who testified at a special hearing on Wednesday, is the main target of criticism over the government’s failure to rigorously pursue warnings about the payment company’s accounting practices. While the spotlight of a parliamentary investigation may only be delayed, it’s not a given in Germany’s complicated political landscape.
Florian Toncar, a member of the committee from the Free Democrats, said he planned to propose the move to the Left party and the Greens — together they would have enough votes. But the far-right Alternative for Germany also supports the effort, which could create an alliance that might put off many voters.
If a probe is called, it could last well into 2021 and overshadow the early stages of next year’s election campaign.
The Wirecard debacle threatens to undermine Scholz’s bid to lead the Social Democrats in the run at the chancellery. He has the most government experience of any contender, including hopefuls from Merkel’s Christian Democrats.
After the closed-door hearing, Scholz said Germany needed to strengthen its financial enforcement. He also called for the creation of a European equivalent of the U.S. Securities and Exchange Commission.
“We need reforms,” he said. “There must be consequences in terms of legislation and repairs.”
He also spoke in favor of a faster rotation of auditors compared with the current 10 years. He suggested four years to lawmakers, according to a person familiar with the discussions. That responsibility lies with Economy Minister Peter Altmaier, who’s a member of the CDU and also testified at the hearing.
“Every minister is reviewing the procedures under his responsibility,” he told reporters, adding that rotating auditors need to be seriously considered. “Scholz needs to hold discussions very quickly about strengthening BaFin,” Germany’s financial regulator.
Scholz oversees BaFin and had to explain why his officials didn’t detect irregularities. He has come under additional pressure because his deputy Joerg Kukies, who regularly briefed his boss about developments of Wirecard probes, had at least two meetings with Markus Braun, the former Wirecard chief executive officer who has been arrested by German prosecutors.
Frank Schaeffler, a lawmaker from the Free Democrats, called on Kukies to step down, according to an interview in Bild newspaper.
Mounting pressure prompted Merkel’s office to take the unusual step of unveiling a time line of interactions with Wirecard. It showed her office maintained regular contacts with the company.
Merkel herself promoted Wirecard’s efforts to gain a Chinese license during a state visit in September 2019. Her office was informed of inquiries into allegations of market manipulation just prior to the trip but denied that she was aware of the possibilities of “severe irregularities” at the time.
Wirecard, a member of Germany’s benchmark DAX index, became a national disgrace after acknowledging that about quarter of its balance sheet probably doesn’t exist. The collapse set off a blame game between banks, auditors and public authorities and revealed large gaps in the country’s corporate oversight.
Prior to the hearing, Der Spiegel magazine reported that BaFin President Felix Hufeld gave false information to lawmakers about the regulator’s role in Wirecard’s collapse. BaFin fired back, saying the testimony was accurate. De Masi called the allegations of misinformation a “serious issue.”
Before and after of the gathering in the glass-domed Reichstag in Berlin, Scholz went on the offensive appearing on national television to promote his proposals for strengthening Germany’s financial oversight. But the efforts may still not be enough.
“Olaf Scholz could not dispel the notion that he acted too late in light of the many suspicions” against Wirecard, said Danyal Bayaz, a lawmaker with the Greens. “Scholz should have taken a closer look politically and asked the authorities to turn every stone over.”
(Recasts with comments from Scholz and lawmakers)
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