Finance

Olaf Scholz defends German government’s record on Wirecard

Olaf Scholz, Germany’s finance minister, said the government bore no responsibility for the Wirecard scandal, in testimony that marked the high point of a six-month parliamentary inquiry into the worst case of corporate fraud in the country’s postwar history.

He also dismissed the idea that his ministry had tried to protect Wirecard as an “absurd fairytale”.

Scholz is the most senior politician to be questioned by the Wirecard committee of inquiry so far — a probe that has exposed profound weaknesses in Germany’s system of financial oversight.

A key focus of the inquiry is why authorities failed to intervene to stop the fraud at Wirecard, despite a profusion of warning signs. Instead, the German financial watchdog BaFin banned short selling in Wirecard shares and filed criminal complaints against the FT reporters who first reported irregularities at the company. 

Opposition MPs say the responsibility stops with Scholz, who as finance minister oversees BaFin, as well the Financial Intelligence Unit, Germany’s anti-money laundering agency — another body faulted for failing to adequately deal with suspicious activity at Wirecard.

But Scholz, who is the left-of-centre Social Democrats’ candidate for chancellor in September’s Bundestag elections, dismissed the suggestion that he or his ministry were to blame. “The government does not bear responsibility for this large-scale fraud,” he said in an opening statement to MPs. 

Instead he pointed the finger at Wirecard’s auditor, EY, which gave the disgraced tech group unqualified audits for more than a decade and failed to pick up on flaws in its accounting practices.

Wirecard announced last June that €1.9bn was missing from its accounts and soon afterwards collapsed into insolvency. Prosecutors in Munich accuse its former chief executive, Markus Braun, of having run a criminal racket that conducted “fraud in the billions”. Braun, who has been in police custody since last summer, denies wrongdoing.

Scholz defended BaFin’s actions in the course of the Wirecard affair, saying it had acted correctly in early 2019 when it asked Germany’s accounting watchdog FREP to investigate the payment company’s accounts. “My impression was all that was necessary had been started,” he said.

He also stressed that he had played no role in BaFin’s short selling ban, saying the regulator was independent. But he said that there were now “significant doubts” as to whether the ban had been a good idea.

Scholz admitted weaknesses in Germany’s system of regulation, saying: “With the knowledge and insights we have today, it’s clear that the state supervisory and regulatory structures are not adequately equipped for such an attack.”

But he said the authorities had moved quickly to rectify the situation, driving through a sweeping reform of BaFin that would give it greater powers. Scholz recently poached the head of Swiss regulator Finma, Mark Branson, to head the beefed-up watchdog.

“My goal is a financial watchdog that can play globally in the premier league,” he said. “The most important task is to restore confidence in Germany as a financial centre.”

MPs appeared unconvinced by Scholz’s arguments. Matthias Hauer of the ruling CDU asked him whether he bore “personal responsibility” for the fact that the scandal did not come to light earlier. Scholz answered: “No.” Questioned about the role of his colleagues at the finance ministry, he said: “They are very good people who have done sterling work.”

Scholz also faced questions from MPs over three emails about Wirecard that he sent from his private account, having previously asserted that all communication about the company had been conducted from his work account.

The minister said he used his private email to forward newspaper articles to others because it was “easier”.

Hans Michelbach, an MP for the centre-right CSU, described Scholz’s failure to provide all private email correspondence regarding Wirecard to the inquiry as an “extremely serious matter”.

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