Scholz defends handling of Wirecard debacle at Bundestag grilling

Olaf Scholz, Germany’s finance minister, defended his handling of the Wirecard scandal in closed-door hearings in the Bundestag on Wednesday, insisting the authorities had done all in their power to uncover irregularities at the disgraced payments company.

Mr Scholz insisted that sweeping reform of German financial regulation, unveiled by his ministry last week, would fix deficiencies in the system and ensure there would be no repetition of the Wirecard affair, according to participants of the session.

The minister said his main concern was that “once the present outrage has dissipated, when this is no longer the big issue of the day, that we will no longer have the strength and courage needed to enact these reforms”, he told reporters after the hearing.

However, some opposition MPs said they were unimpressed with his performance, and continued to insist on a full parliamentary inquiry into the scandal. That could prove politically damaging for Mr Scholz and undermine his chances of running as the Social Democrats’ candidate for chancellor in next year’s Bundestag elections.

“The really interesting questions [regarding Wirecard] remain unanswered,” said Fabio De Masi, an MP from the leftwing party Die Linke and a member of the Bundestag finance committee.

He said Mr Scholz had failed to explain why his ministry lobbied for the digital payments company in China in mid-2019, months after the minister had been made aware of the “serious accusations” against Wirecard.

At issue was the question of whether the government could have done more to avert what has turned out to be the worst accounting scandal in Germany’s postwar history.

Wirecard was forced to file for insolvency last month after admitting that €1.9bn of its cash probably did “not exist”. Prosecutors now believe former chief executive Markus Braun and others were involved in a multiyear fraud designed to inflate Wirecard’s revenue and so deceive investors.

The scandal has shone an unforgiving light on Germany’s system of financial regulation, with the finance ministry and the financial market watchdog BaFin accused of failing to act on countless reports of irregularities at Wirecard.

“Olaf Scholz could not dispel the criticism that he acted too late, in a manner that seems negligent when you consider all the suspicious factors [in the Wirecard affair],” said Danyal Bayaz, an MP for the Greens. “Scholz should have taken a much closer look and demanded that the authorities leave no stone unturned: he obviously did not make the most of the possibilities of his office and his ministry.”

Questions have been asked, in particular of BaFin’s handling of the affair. When the Financial Times published stories on an internal investigation in Wirecard’s Singapore headquarters, the regulator opened a probe into the FT itself, alleging an attempt to manipulate the market. Then in February 2019 it announced a two-month ban on the short selling of Wirecard shares, citing the company’s “importance for the economy” and the “serious threat to market confidence”.

Despite the steady drumbeat of negative news on Wirecard, the German government has revealed in the past few weeks that Angela Merkel, the chancellor, lobbied for the company’s interests in talks with Chinese officials during an official trip to Beijing last September. Meanwhile one of Mr Scholz’s closest aides, Wolfgang Schmidt, a state secretary at the finance ministry, also lobbied for Wirecard in China in mid-June, months after Mr Scholz had been informed that the company was being investigated for suspected market abuse.

Economy minister Peter Altmaier was also grilled because his department oversees APAS, the watchdog for Germany’s auditors. MPs wanted to know why APAS had not expressed any doubts about the work of Wirecard’s auditor EY, which provided unqualified audits of the company for years. 

He said after the meeting that the APAS had acted very early on in the scandal and had taken the necessary and correct measures at every juncture.

Mr Altmaier said none of the MPs’ questions had been left unanswered. “I don’t think there are any ambiguities there in any shape or form,” he told reporters.