News analysis

Blow to a nation's pride and global standing

BERLIN • As Germany has emerged as the dominant actor in Europe, it has lectured Greece and other debtor nations on the virtues of thrift and lately wagged its finger at countries that baulk at receiving a share of refugees from the killing fields of Syria. Its right to lead, based on a narrative of self-sacrifice and obedience to rules, was generally acknowledged.

That is one reason the Volkswagen scandal has shaken the country's very core. More than just a tale of corporate misdeeds, the disclosure of systematic cheating by one of Germany's most iconic companies has delivered a sharp blow to its conception of itself as an orderly nation and tarnished its claim to moral leadership of the continent.

It was perhaps inevitable that Volkswagen's chief executive, Mr Martin Winterkorn, would quickly step aside on Wednesday after disclosures that the company deceived regulators over emissions from its diesel cars. But the effects on Germany are likely to play out for some time, even as it copes with a huge influx of migrants attracted by its reputation as Europe's beacon of opportunity and as it continues to find its footing as an often-ambivalent global power.

Further, the timing puts Germany in an awkward spot ahead of the global climate conference in Paris in December, where it had hoped to hold out its transformation as an industrial power reliant on a lower-carbon energy system as a model to the world.

In the immediate aftermath, Germany's leaders scrambled to distance themselves from the scandal and to mitigate the damage to the auto industry, which accounts for one in seven German jobs.

"The damage that a few people have caused for the firm and its workers is huge," said German Vice-Chancellor and Economy Minister Sigmar Gabriel as he toured the annual car show in Frankfurt on Wednesday. But, "we must take care that doesn't unleash a whole debate about the auto industry in Germany or the German economy," he continued.

In fact, it may be too late for that. Germany is very closely aligned with its car industry. Indeed, the state of Lower Saxony, where Volkswagen is headquartered in Wolfsburg, owns about 20 per cent of the company. Any governor of that state is deeply involved in the company's affairs.

"The saying is, when Wolfsburg has a sniffle, the whole state gets sick," said Ms Rebecca Harms, a prominent deputy for the Greens in the European Parliament, who grew up in Lower Saxony. Now "its reputation is really damaged. This is a catastrophe, not just for Lower Saxony but for a global enterprise" with 600,000 employees, she said.

So far, there is no evidence the government knew about the deception, though it was aware there could be deviations between emissions on the road and in the laboratory. But the matter is not just about jobs, market share or corporate reputations. The scandal captures Germany at a moment when it has been trying to hold onto values it always saw as defining, but that have become increasingly difficult to maintain as it becomes drawn into the messy problems of Europe and the world.

The Volkswagen blow came after months in which Germany seemed to go out of its way to bolster devotion to rules by imposing austerity measures on Greece, as a condition for a third bailout. Berlin insisted that European partners stick to what it said were the rules of the euro currency union.

Yet no sooner was it gaining a reputation in Greece and in other southern European nations as, at best, a strict taskmaster and, at worst, a heartless bully, than Germany and its Chancellor Angela Merkel were transformed.

By opening its doors to migrants from Syria and other troubled spots in the Middle East, admonishing other European nations to do their fair share and showcasing its immense volunteer network to make the newcomers feel welcome, it has in recent weeks been seen as the soft heart of Europe - a reputation it seemed to cherish, given its history.

The refugee crisis has revealed weaknesses in the German system. Many blamed the latest surge in refugees - particularly from war-torn Syria - on a Twitter post from a German government agency that appeared to offer asylum in the nation to any Syrian who made it to German soil.

Dr Merkel's hugs and assurances that Germany would accommodate all those worthy of asylum proved a step too far. With systems taxed and chaos advancing on its borders, Germany reimposed border checks this month.

Perhaps even more harmful in the long run, the Volkswagen scandal also comes at a time when Germany is trying to set an example for the rest of the world on lowering carbon emissions. Its ambitious policy of shifting away from carbon-based fuels to alternative energy like wind and solar has driven up costs for German business and consumers. Yet Germany has stayed its course.

As the immediate shock has subsided, Germans have sought a way to explain the Volkswagen chapter. "The biggest problem of VW is that this giant concern has become ungovernable," Sueddeutsche Zeitung, the German newspaper, wrote on Wednesday. "VW is led centrally from Wolfsburg. Just a few people have a say - everyone else just receives orders. Doubts or, even, resistance, are unwanted."

Ms Harms, who has campaigned for years on environmental issues, said Volkswagen could easily have complied with the standards imposed by the Environmental Protection Agency in the United States. "Why they decided instead to bet on manipulation" is incomprehensible, she said.

But the very fact that Germany's leaders in politics and industry felt compelled to try to control the damage indicated the depth of the wound to the nation's pride and standing. "Trust is part of the lust for innovation in a country," said Mr Volker Kauder, a key member of Dr Merkel's Christian Democrats. Its loss "could really cause us economic problems".


A version of this article appeared in the print edition of The Straits Times on September 25, 2015, with the headline 'Blow to a nation's pride and global standing'. Subscribe