He avoids direct answers when asked about the tax evasion controversy known as the Cum-Ex affair involving Olaf Scholz. On August 11, at the chancellor’s traditional summer press conference—the first since a recent holiday—the topic came up again. After taking a patient, even friendly approach with German journalists, Scholz indicated that he was close to losing his composure when pressed by a Dutch reporter about the matter.
Second, during remarks in Hamburg, the Warburg family was cited by a journalist who claimed the bank could have stayed with money that could be characterized as stolen during Scholz’s tenure governing the northern city-state. The Chancellor denied the accusation outright and warned the reporter to choose words carefully, suggesting that he could face legal consequences for making unprovable claims. The exchange underscored Scholz’s concern about escalating media scrutiny and the potential political costs for the Social Democratic leadership.
This Friday, Scholz faced a parliamentary commission of inquiry in a scenario viewed as politically delicate for the highest national office. He reiterated: “I did not affect the Warburg tax process in any way. I remain hopeful that assumptions and implications will be dropped,” a statement seen by some as addressing a broader media landscape examining the chancellor’s handling of the issue.
Government Fraud
The Cum-Ex scheme is described by critics as one of the largest tax-avoidance operations in postwar Germany. It allegedly involved a circle of bankers, lawyers, brokers, and others who leveraged a trading mechanism to claim tax refunds on dividend payments. According to Finanzwende, a non-governmental organization co-founded by Gerhard Schick, the scheme may have diverted more than 10 billion euros from the German treasury.
Here is a simplified outline of the operation: following the purchase and sale of shares, an entity would seek a tax refund on dividends. If the refund was granted, the participating parties would keep the money, while the government believed it had legitimately collected revenue. Critics say the system exploited gaps in tax rules and shifted the financial burden onto other taxpayers.
Finanzwende estimates that the fraud likely occurred primarily between 2001 and 2011. Investigations indicate involvement by nearly 100 banks and savings banks. The case has surfaced in police records linked to major financial institutions, including the German bank, Morgan Stanley, and Sparda banks. Schick notes that the full scope remains unclear and suggests the total could be higher than the current estimates.
Memory Loss
The Cum-Ex affair has lingered over Olaf Scholz for years. Before becoming chancellor, he served as mayor of Hamburg and met with Warburg bank representatives, including Christian Olearius and Max Warburg, in 2016 and 2017. Scholz has stated that he does not recall the specifics of those discussions. In contrast, Olearius maintained in his diary that he sought counsel from Scholz about a 46 million euro demand tied to the Cum-Ex case, which had been pursued by the Hamburg state for a period. Following those discussions, the treasury reportedly stopped pursuing the money from the bank, prompting questions about potential political influence.
The issue, which Scholz and his team tried to downplay during recent election campaigns that culminated in his rise to federal chancellor, has reemerged in light of new reporting. German media have provided details indicating a police search in September of the previous year, including cash found, and connections to Johannes Kahrs, a Hamburg-based Social Democratic MP who could play a role in negotiations between Scholz and local financiers.
The Cologne public prosecutor’s office overseeing the Cum-Ex matter approved the transcript of Scholz’s personal secretary after finding that some emails were deleted under suspicious circumstances. Analysts from Finanzwende and investigative journalists have raised questions about the chancellor’s memory of the events, while opposition figures increasingly discuss the possibility of resignation as debates intensify in certain parliamentary circles.