The Queen's Gambit

This newsletter is a 6-minute read

Dear Readers,

Today we’re previewing Saturday’s CDU leadership election. Its outcome is vital to the country’s future, but the backstory provides yet more proof of Angela Merkel’s knack for outthinking her opponents.

Jörg & Axel

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1. Peter Altmaier: the 10x stock-picker

In one of our first newsletters last August we wrote about how the German state invested €300m in the biotech company CureVac. Economy Minister Peter Altmaier patted himself on the back for his quick action and boasted that the move would keep the COVID-vaccine developer safely in German hands.

The unprecedented investment drew criticism from industry associations and politicians of the left alike:

“It’s not the role of the state to arbitrarily invest in companies just because the Minister thinks it’s cool to own a vaccine producer,” said Katharina Dröge of the Greens.

And, as we wrote, there was some evidence to suggest that the threat of a takeover by the US government could have been an orchestrated play to take the company public at a bombastic valuation.

Fast forward six months: Johnson & Johnson is hoping that their vaccine will be the fourth to be approved by the European Medicines Agency this February, but it will take until the summer until state-owned CureVac is that far down the road. If one is to believe Health Minister Jens Spahn’s prognosis, by that time it might be too late…

Mr Altmaier’s gamble with taxpayer money is just one example of how this German government has overstepped the boundaries of its executive mandate during the pandemic.

Ironically enough Altmaier (who is also facing criticism for the delayed support payments to small businesses) has turned out to be a decent stock picker. At the time of his investment CureVac was valued at €1.3 billion. Yesterday the company’s market cap was €14B. A neat paper gain of €3 billion for the taxpayer.

2. The hidden costs of cheap German meat

When public broadcaster WDR used a children’s choir to accuse Germany’s seniors of not giving a damn about the environment with a song called “Oma ist 'ne alte Umweltsau” there was no end of Empörung. In particular these lines lamenting Oma’s steak habit didn’t go down well.

“Meine Oma brät sich jeden Tag ein Kotelett, ein Kotelett, ein Kotelett. Weil Discounterfleisch so gut wie gar nichts kostet, meine Oma ist ne alte Umweltsau.”

While meat consumption has gone down over the last couple of decades, the Fleischatlas 2021 released by the Böll-Stiftung shows that Germans are still more carnivorous than their neighbours - 60 kilograms of meat per head is consumed every year. But, apart from the occasional children’s choir, no one was asking why meat is so cheap - the wholesale price of a kilogram of pork is five times lower than in 1995.

Then came the pandemic and one of German industry’s worst kept secrets was exposed. A virus outbreak at one of meat-giant Tönnies abattoirs infected 1,500 workers and forced the whole community of Rheda-Wiedenbrück into lockdown.

The conditions under which (mainly Eastern European) workers toil and live could no longer be ignored and the German public found out what meat barons such as Clemens Tönnies and local politicians knew all along - there’s a human cost to cheap meat.

In January a new law, drafted by labour minister Hubertus Heil (SPD) came into force with the ambition to change that. Activists and trade unions are cheering what is seen as the most ambitious attempt yet to root out working conditions that would put 19th century England to shame.

The trick that Tönnies and Co. have used for years is to pay subcontractors fixed prices for certain volumes of slaughtered meat. The subcontractors make money by pushing their workers to work fast and often without appropriate safety equipment in long, gruelling shifts. Skimmed wages or outright refusal to pay have been common; the workers have little negotiating power.

At the same time critics ask why it has taken so long. Even as domestic consumption has declined, production has gone up. Thanks to subcontracting schemes, Germany has become Europe’s meat-production hub. Danish and Dutch producers have moved their operations cross border to benefit.

According to transparency website Parliament Watch the reason is simple - the meat industry has been paying politicians handsomely to consult for agricultural associations in order to keep them from regulating their practice. The CDU in particular has strong ties to the meat industry, but last year former SPD leader Sigmar Gabriel was criticized for earning €10,000 a month for consulting Tönnies.

Beatte Müller-Gemmeke, a Green MP, has praised the subcontracting ban, but asked in an interview with the Financial Times why the CDU fought so hard to water down the law and why there was such strong pushback against regulating abattoir inspections.

As the law only requires 5 per cent of abattoirs to be inspected by 2026 one suspects that Oma will be able to cook Discounterfleisch for her grandchildren for a few more years yet.

3. Das Damengambit

From a politician known for her discretion, it is probably too much to expect that Angela Merkel will one day divulge when she first caught wind of Friedrich Merz’s surprise plan to return to politics after a decade amassing a fortune on the board of Blackrock.

It is a fascinating detail though.

What seems clear is that Merkel already started arranging her chess pieces shortly after the 2017 election. She had just lead the CDU to the worst result in its history, and with her popularity at rock bottom she knew there would come a point during her fourth term when she would have to make a strategic retreat or face an inner-party revolt.

So she brought Annegret Kramp-Karrenbauer into the second most important post in the party - general secretary - promoting her from relative obscurity as state leader of tiny Saarland. Kramp-Karrenbauer was high profile enough to be taken seriously as a possible successor but in no way powerful enough to pose a threat to her authority.

It is a trick CDU politicians, who’ve reportedly talked of the Merkel monarchy for years, know well. She appoints people who have limited clout to senior roles, thus making them dependent on her patronage.

After several setbacks during the summer of 2018, including a humiliating Bundestag rebellion against her loyal faction leader, the decisive moment came that autumn. At the state election in Hesse, the CDU won just 27 percent of the vote, with both the Greens and the AfD taking large chunks out of them. 

With mutiny in the air, Merkel made her move. She told the party hierarchy that she would not stand to be chairwoman again at the conference that winter, but she would stay on as Chancellor. At the same meeting, Kramp-Karrenbauer announced that she would be running for the vacant post.

Loyalists took to the airwaves to assure the party base that Merkel had made a gracious concession. ‘“She’s proved once again that she reacts intelligently and calmly,” said Hamburg’s CDU leader Roland Heintze.

While Merkel’s government had been involved in a bloody civil war for most of the summer, Kramp-Karrenbauer had been out and about meeting party members to “listen to their concerns” - or to get a head start over any possible rivals on the campaign trail.

Sure enough, just ten minutes after news of Merkel’s announcement leaked to the press, Mr Merz announced that he would also be standing for the chairmanship. He’d been out of politics so long that the younger generation didn’t know who he was anymore. Merz had briefly been CDU faction head in the Bundestag between 2000 and 2002 before Merkel pushed him out. She never invited him to join her first cabinet and he left politics, a forgotten man, in 2009.

And then suddenly he was back. He took to the campaign trail promising to give the party back its conservative soul. In the media, the contest quickly became one between the continuity candidate, or “mini-Merkel'' as the diminutive Kramp-Karrenbauer became known, and the anti-Merkel with an axe to grind. 

Everyone knew what a Merz victory would mean: heightened conflict within the unhappy “grand coalition” with the Social Democrats, early elections, and Merkel leaving office without seeing out her last term.

Government ministers rallied around Kramp-Karrenbauer and she won the vote of the 1,001 delegates at the conference. But she only just won it.

For Merkel, Kramp-Karrenbauer’s narrow victory meant that the spotlight no longer shone on her. A mediocre showing at the European election five months later led journalists to ask if Kramp-Karrenbauer had what it takes to turn the party fortunes around. The support she received from the Chancellery was lukewarm at best.

After struggling against headwinds for a little over a year, AKK threw in the towel last February. The final straw came when she failed to prevent the CDU in Thuringia from voting with the AfD for a new state leader. Only an eleventh hour intervention from Merkel saved her party from humiliation.

Saturday will be Kramp-Karrenbauer’s last day in charge of the party. Delegates will choose her successor at a digital conference. While she also holds the position of minister of defence, her career in front line politics is surely all but over.

Friedrich Merz is still in the game though. This time he is running against the continuity candidate Armin Laschet - a Merkel loyalist and state leader in North Rhine-Westphalia. Norbert Röttgen, head of the foreign affairs committee, is the third man in the race - he’s an outsider presumably hoping to secure himself a spot in the next cabinet.

With the party polling well, the continuity candidate should be a shoe-in in a party that famously doesn’t like experiments. But the jovial, good-natured Laschet hasn’t tapped into the anxious public mood in the same way as the ambitious Bavarian leader Markus Söder has during the pandemic. In the media, he has been portrayed as a flip-flopper who can’t decide if he likes lockdowns or not.

Which gives Mr Merz a second chance. If the CDU do pick him, it’ll be a risk. His bullish threats to “put all state expenses up for review” would create a sharp ideological rift between the main parties for the first time in years. If things were to go right, he would push the AfD back down into single digits or even out of the Bundestag and be able to build a coalition with the liberal Free Democrats. If things went wrong, the party would haemorrhage votes to the Greens and be an even more diminished force.

For Merkel though, Merz is no longer a risk. The public has fallen back in love with the eternal Kanzlerin during the pandemic. Her old rival, who once called her government “grottenschlecht”, has felt the need to coo about her achievements on evening talk shows. If he loses again on Saturday, one imagines she’ll toast her man’s victory with a particular twinkle in her eye.

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Who we are:

Jörg Luyken: Journalist based in Berlin since 2014. His work has been published by German and English outlets including der Spiegel, die Welt, the Daily Telegraph. Formerly in the Middle East. Classicist; Masters in International Politics & Arabic from St Andrews.

Axel Bard Bringéus: Started his career as a journalist for the leading Swedish daily Svenska Dagbladet and has spent the last decade in senior roles at Spotify and as a venture capital investor. In Berlin since 2011.