Resentment over Schulze’s handling of billions of euros in tax fraud ends in confrontation

BERLIN (Reuters) – Hamburg lawmakers’ questioning of German Chancellor Olaf Schulz over his handling of billions of euros in tax fraud when he served as the city’s mayor ended in deadlock on Friday, with Schulz denying any wrongdoing and accusing opposition lawmakers. him from obscuring the truth.

Although the 3-1/2 hearing yielded no new insights into the “former vice president” scandal, the fact that the case continues threatens to undermine the chancellor, who is struggling to hold together his divided coalition in the face of the public. Resentment of rising energy costs.

In a “cum-ex” scheme, or dividend stripping, banks and investors would quickly trade corporate stocks around dividend day, obliterating stock ownership and allowing multiple parties to recoup the dividend tax deductions.

The loophole, now closed, took on a political dimension in the northern port of Hamburg due to the slowdown by authorities in 2016 when Schulz was mayor to demand repayment of the millions of euros that local Bank Warburg received under a scheme.

Warburg, which plays a large role in Germany’s second largest city, eventually paid its tax bill of around 50 million euros ($50.3 million) after the intervention of the Federal Ministry of Finance.

“I exercised no influence on the Warburg tax issue,” Schulz said Friday during his second appearance before the Hamburg parliamentary inquiry into the former vice president’s case, one of Germany’s biggest post-war corporate scandals.

“Nowhere is there even the slightest suggestion that I agreed to anything,” he said, referring to dozens of other testimonies before the commission during the two-and-a-half years of the investigation.

Schulz insisted again that he could not recall the content of the three meetings he had at the time with the Warburg chief, adding that he had met with representatives of other banks as well as mayor.

“The chancellor, in fact, today declined to participate in the investigation,” said Richard Selmaker, the opposition Conservative representative on the committee, sarcasting that Schultz should be hypnotized to recover his lost memories.

Selmaker said Schultz could be called to testify before lawmakers for the third time as new findings from the investigation emerge.

The chancellor’s popularity lags behind that of the economy and foreign ministers, while only 58% of Germans think he is doing well compared to an average of 70% for his predecessor, Angela Merkel, during his 16 years in office.

His Social Democratic Party (SPD) has slipped to third place in opinion polls behind the opposition Conservatives and junior coalition partners the Greens.

200,000 euros in a safe place

Finance Minister Christian Lindner, of the pro-business Liberal Democrats, who is also trailing in opinion polls, gave his support to the chancellor on Friday.

“I have always understood that Olaf Schulz is an honest person, whether I was in the opposition or as now in government – and I have no reason to doubt that now,” Lindner told the Rheinische Post.

The leading Greens remained silent on the issue after criticizing Schultz about it while in opposition.

Recent news headlines that prosecutors investigating the scheme in Hamburg discovered €200,000 in the treasury of a local politician from the ruling Social Democrats in Schulz, have raised suspicions of political interference in the bank’s favour.

Schultz denied any knowledge of the cash or its source and said he was no longer in contact with the attorney in question. The deputy did not respond to a request for comment.

“I hope the speculation and insinuations will stop,” Schultz said. “They lack any foundation.”

The chancellor faced the Hamburg deputies last year.

Gerhard Schick, director of Germany’s financial watchdog and a former Green Party lawmaker in the Bundestag’s lower house of parliament, said he did not believe in forgetting Schulz.

“I think this is an allegation and it damages his credibility,” he said.

Der Spiegel magazine, citing the prosecutors’ report, wrote that one of the prosecutors’ recent findings is the discrepancy between several calendar entries for the Hamburg authorities mentioning Warburg Bank and “ComX” and the few emails about it.

“This indicates a targeted deletion (of emails),” Spiegel quoted the report as saying.

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(Reporting by Sarah Marsh and Andreas Reinke); Additional reporting by Hans Seidenstwecker and Jan Schwartz. Editing by Andrew Cawthorne, Toby Chopra and Leslie Adler

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