Germany's Merkel rejects criticism of her Wirecard lobbying in China

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By Christian Kraemer and John O'Donnell

FRANKFURT (Reuters) -German chancellor Angela Merkel rejected criticism of her lobbying for Wirecard in China months before it collapsed, telling lawmakers she had no reason to suspect the firm of criminality as she sought to help it do business there.

Her detailed account of events leading to a state visit to China in September 2019 shone a rare light on the inner workings of government and its lobbying for business, marking the climax of a public inquiry into the country's biggest post-war fraud.

Wirecard, which began by processing payments for gambling and pornography, had been hailed as a rare German technology success story, although few really understood it. Once valued at $28 billion, it abruptly unravelled last year.

In her testimony, Merkel outlined how Wirecard's aim of buying a Chinese company fitted in with her agenda of helping German companies on the trip, lobbying she described as a normal part of her job.

"What is known since Summer 2020 ... about Wirecard was not known in 2018/2019," said Merkel, adding: "There was no reason to think that there were serious irregularities, in spite of press reports."

Merkel gave a vague account of her meeting, shortly before her journey to China, with Karl-Theodor zu Guttenberg, a former German economy minister who lobbied on behalf of Wirecard, saying she did not remember if he brought up the company.

Highlighting the fact that EY, Wirecard's auditor, had signed off on the company's accounts and emphasising that she had no reason to doubt the information she had been given by the Finance Ministry, Merkel emphasised her ignorance at the time.

"There is no 100% protection against criminal behaviour," she said.

Merkel is the latest politician to wash her hands of the scandal, after Olaf Scholz, her deputy, blamed Wirecard's auditor, EY, for failing to catch the fraud. EY has said it acted professionally.

A host of other officials have rejected responsibility, saying they should not be blamed for the mishaps that led German authorities to pursue the company's critics for years rather than examine Wirecard itself.

Much evidence uncovered by the inquiry suggests German officials acted in ignorance, although lawmakers believe Wirecard's use of former politicians and intelligence officials for lobbying helped shield it from critics.

Germany's fragmented patchwork of regional authorities, all with a role to play in holding Wirecard to account, meant that the company was largely given free rein.

Lawmakers say that the German government was biased in favour of the company, turning a blind eye to allegations of irregularities in the run up to its collapse.

"The Chancellor lobbied for Wirecard with the most powerful man in China," said Fabio De Masi, one of the lawmakers leading the public inquiry, asking why she gave it such priority.

In power since 2005, Merkel remains popular, although her legacy, such as her 2015 decision to open Germany's borders to refugees fleeing war in the Middle East, divided opinion.

The Wirecard debacle tarnished her government's reputation by shining a spotlight on the lengths some German politicians have gone to in order to support companies.

Stephan Klaus Ohme of Transparency International said it had exposed cracks in Germany's laissez-faire model towards industry, leaving companies largely to their own devices.

"In Germany, you should stick to the rules but if you don't, nothing happens. The penalties are laughable," he added.

($1 = 0.8329 euros)

(Additional reporting by Paul Carrel and Tom Sims; Writing by John O'Donnell; Editing by Alexander Smith and Elaine Hardcastle)

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