Child-porn scandal unleashes tensions in Merkel coalition

German minister resigns in blow to new Merkel government

By Erik Kirschbaum

BERLIN Fri Feb 14, 2014 9:52pm GMT

Germany's Agriculture Minister Hans-Peter Friedrich announces his resignation in Berlin February 14, 2014.

Credit: Reuters/Tobias Schwarz

(Reuters) - A senior German minister resigned on Friday amid accusations he leaked confidential information about a fellow lawmaker suspected of possessing child pornography, dealing a blow to Chancellor Angela Merkel and her two-month old government.
The resignation of Agriculture Minister Hans-Peter Friedrich, the latest in a series of cabinet departures under Merkel, could aggravate tensions in Berlin's new "grand coalition" at a time when it is trying to push through complex reforms of pensions and renewable energy.
"The pressure on me has grown so much in the last couple of hours that I no longer think I can do the job in the agriculture ministry with the required concentration, calm and political support," Friedrich told a hastily-called news conference.
Merkel said she had accepted Friedrich's resignation "with great respect and great regret", adding that it was too early to discuss who would succeed him.
The resignation follows questions about whether Friedrich, a member of Merkel's Bavarian sister party, inappropriately passed on confidential information about a looming investigation into a prominent Social Democrat (SPD) lawmaker to the leader of the
SPD.

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UPDATE 4-German minister resigns in blow to new Merkel government

Fri Feb 14, 2014 4:46pm EST

* Merkel cabinet minister gave SPD advance warning of probe
* SPD lawmaker Edathy has denied child porn allegations
* Departure could aggravate tensions in coalition (Adds comments from Gabriel)

By Erik Kirschbaum

BERLIN, Feb 14 (Reuters) - A senior German minister resigned on Friday amid accusations he leaked confidential information about a fellow lawmaker suspected of possessing child pornography, dealing a blow to Chancellor Angela Merkel and her two-month old government.
The resignation of Agriculture Minister Hans-Peter Friedrich, the latest in a series of cabinet departures under Merkel, could aggravate tensions in Berlin's new "grand coalition" at a time when it is trying to push through complex reforms of pensions and renewable energy.
"The pressure on me has grown so much in the last couple of hours that I no longer think I can do the job in the agriculture ministry with the required concentration, calm and political support," Friedrich told a hastily-called news conference.
Merkel said she had accepted Friedrich's resignation "with great respect and great regret", adding that it was too early to discuss who would succeed him.
The resignation follows questions about whether Friedrich, a member of Merkel's Bavarian sister party, inappropriately passed on confidential information about a looming investigation into a prominent Social Democrat (SPD) lawmaker to the leader of the SPD.
Friedrich was interior minister in the previous centre-right government at the time.
It emerged this week that the SPD lawmaker, Sebastian Edathy, is being investigated by prosecutors, who suspect him of possessing child pornography, an accusation Edathy has vigorously denied.
The 44-year-old Edathy, well known in Germany for leading a 2012-13 inquiry into neo-Nazi killings, resigned from parliament last week, citing health reasons, and has threatened to sue the newspaper that first reported about the child porn suspicions earlier this week.
WHO TIPPED OFF EDATHY?
What started as a small domestic affair erupted into a major political scandal on Thursday when it emerged that Friedrich had informed SPD chairman Sigmar Gabriel in October that Edathy could become the target of an investigation.


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Child-porn scandal unleashes tensions in Merkel coalition

Photo: EPA

German Chancellor Angela Merkel is facing mounting tensions in her two-month-old coalition, with members of the government trading accusations Sunday over their role in a scandal sparked by child-porn allegations involving a parliamentarian.

Agriculture Minister Hans-Peter Friedrich resigned Friday following revelations that as interior minister in Merkel's last government, he leaked confidential police information about a child-porn probe concerning a Social Democratic (SPD) member of parliament.
Friedrich's party, the conservative Bavarian-based Christian Social Union (CSU), stepped up pressure on the SPD Sunday, claiming the SPD's public revelation of Friedrich's actions represented a breach of the trust needed between coalition partners.
The CSU is the associate party of Merkel's Christian Democrats (CDU).
Friedrich confidentially told SPD chairman Sigmar Gabriel about the child-porn inquiry last October, just as Merkel was negotiating to form a coalition with the SPD.
The SPD leadership is now under pressure to prove in public that it maintained secrecy around the tip-off that the lawmaker, Sebastian Edathy, was under suspicion of purchasing child pornography.

In a newspaper interview, SPD parliamentary faction leader Thomas Oppermann defended his decision to contact the head of Germany's BKA federal police to check out the information provided by Friedrich.

Oppermann told the weekly Bild am Sonntag that it was part of his job to look after a parliamentarian facing "difficulties." He said his purpose in phoning BKA chief Joerg Ziercke at the time was to assess the significance of the claims against Edathy.


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History Repeats Itself ? : The Glass-Steagall Act was only made possible because a Senate committee had exposed the dumb, risky and at times criminal behavior of banks in the run-up to the Great Depression. The outrage paved the way for the law.

August 2, 2012 by desertrose  

Splitting the Financial Giants It’s Time To Break Up Massive Banks!

International

AFP

A demonstrator at a 2011 day of global protest in London: Banks should not be allowed to get too big to fail.

For decades, America’s Glass-Steagall Act ensured a clean division of commercial and investment banking. But its repeal paved the way for the global financial world. Today politicians should restore the dual banking system to help ensure that banks that are too big to fail do not exist in the future.

The banks are blackmailing us, Sigmar Gabriel, the head of Germany’s center-left Social Democratic Party wrote in a position paper for his party. But with the fuss over Gabriel’s partly justified and partly exaggerated claim, one hopes that the most important words spoken last week will not get lost in the noise.
Those words were from Sandy Weill, who for eight years was the decisive figure at Citibank, the major American bank. This is the same Sandy Weill who forged a financial empire and successfully fought against just about every regulation that has been thrown at the banking sector. His messagetoday? Split up the massive banks.
What Weill is calling for is a return to rules that already once served the world well. They were conceived during the 1930s financial crisis and then disposed of during the liberalization frenzy of the 1990s.
The Glass-Steagall Act is the name of the law that divided the banking world into two categories.
The first is banks that are dedicated to the classic business of managing customer deposits and issuing loans making them systemically relevant. These banks must be protected and, in an emergency, rescued by the state.
The second is investment banks, which too often have no problem at all with any risky business that comes its way as long as it promises to deliver profits. Weill believes that if things go awry at the investment banks that no one should be too quick to bail them out. These banks would be smaller and no longer the financial Goliaths that they are today. What is deemed too big to fail, would be deemed too large to even be allowed to exist in the future.
America, as well as the entire financial world, is discussing Weill’s proposal.
And not without reason, either — after all, the US banker was one of the people who pushed Bill Clinton in 1999 to repeal Glass-Steagall. He even has a plaque in his office celebrating himself as “The Shatterer of Glass-Steagall.”
The proposal still doesn’t have enough backing, despite support in many quarters including those in a number of Germany’s top boardrooms, such as reinsurance giant Munich Re, whose chairman, Nikolaus von Bromhard, also wants to eliminate the design flaw. The SPD’s Sigmar Gabriel wants to as well.
More Pros than Cons
Objections have been raised from all sides (including the editorial staff of SPIEGEL’s business and economics desk). They argue, for example, that the case of the Lehman Brothers bankruptcy shows that nothing can be radically changed. Eventually, the investment bank, whose collapse triggered the financial crisis, should have been rescued in some way or other, they argue. That may be true, but only under the current system.
If a strict division of banks had been in place, it is highly unlikely that Lehman would have been able to drag the entire financial world along with it into the abyss. And, yes, such a division would create problems for an institution like Germany’s Deutsche Bank, which as both an investment and commercial bank would be forced to pursue a new business model. Still, the advantages by far outweigh the disadvantages.
So far, any halfway sensible reform of the financial world has failed because of opposition from Wall Street, the City of London or political forces like Germany’s business-friendly Free Democratic Party. Politicians still believe they can honor their pledge to stop the kind of banking excesses that led to the crisis, but so far nothing has happened.
It may be true that the old dual banking rules wouldn’t be able to function today as they were written decades ago, but they could be adjusted to fit with the current financial world. It would require craftsmanship, but it could and must happen quickly.
Incidentally, the Glass-Steagall Act was only made possible because a Senate committee had exposed the dumb, risky and at times criminal behavior of banks in the run-up to the Great Depression. The outrage paved the way for the law. Sometimes history repeats itself. Glass-Steagall served the world well for decades and it would have been better if it had never been repealed.
It is high time to correct this error.

Georg Mascolo is editor in chief of DER SPIEGEL.

Related articles

• Sandy Weill Calls for a Return to Glass-Steagall (delong.typepad.com)
• Former Citigroup Boss Goes H.A.M. on Big Banks, Advocates Return of Glass-Steagall (nymag.com)
• Sandy Weill Calls for the Return of Glass-Steagall (fool.com)
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• Rattner’s A Star (sporkinthedrawer.typepad.com)
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• Sandy Weill Joins Occupy Wall Street Movement (motherjones.com)
• Mega-bank creator Sandy Weill reverses course, says break ‘em up (finance.yahoo.com)
• Editorial: Sanford Weill’s Change of Heart (nytimes.com)