WASHINGTON, Feb. 25 (UPI) -- Germany's intelligence arm, the BND, paid $6 million to the informant who delivered a CD with the details of close to 1,000 wealthy Germans who were squirreling money away from the taxman in the banks of the independent statelet of Liechtenstein.
Despite the high-profile police raids of the homes and offices that followed, the Germans overpaid.
It emerged over the weekend the British did not bother to use their spies. A humble civil servant from Her Majesty's Revenue and Customs paid less than $200,000 to a Liechtenstein mole for similar information on British tax evaders.
Even without this unpleasant precedent of using spies to do the taxman's work, the alarming feature of the German operation has been the political fallout. The tax scandal has contributed to the marked shift of Germany's political center of gravity to the left, as the latest scandal strengthens the populist and anti-business tide.
German business has itself to blame. Some of the grandest names of German industry have been badly tarnished. A massive exercise in international bribery was exposed at Siemens. Volkswagen operated a more squalid form of corruption in which labor union leaders were tempted with prostitutes. The federal and state governments are stumping up close to $10 billion in an effort to stave off bankruptcy at the publicly owned banks after costly dabbling in America's subprime market.
This follows almost a decade of stagnant real earnings, as Germany grappled with its high labor costs by holding down wages, exporting manufacturing jobs overseas and sharply slashing unemployment pay. Germany's left-wing parties have been able to argue that the German economy recovered through the sacrifices of the workers, while the bosses boozed, bribed and dodged their taxes.
If that terminology of workers and bosses sounds dated, German politics seem to be heading back into the past. The new left party, composed of the old East German Communists and leftist breakaways from the Social Democrats, or SPD, is becoming a real political force.
They won 6.5 percent of the vote Sunday in the western port city of Hamburg, coming from nowhere to prevent the ruling Christian Democrats from winning a majority, as they did in Frankfurt and the state of Hesse last month. The old pattern of German politics, of the dominant CDU and SDP with smaller groups of Greens and the liberal Free Democrats to hold the balance, is no longer functioning as the left surges.
"The German political system is now effectively in gridlock," said Jackson Janes, director of the American Institute for Contemporary German Studies in Washington. "And no one knows how to get it out."
Germany's left party can be very left indeed. One of its members of the German Parliament, Christel Wegner, publicly defended the Berlin Wall and justified the notorious Stasi secret police of the old East German regime.
"I think that when one builds a new societal form then one needs such an organ (the Stasi) because one has to protect oneself from other forces, reactionary forces, that look for opportunities to weaken a state from the inside," she said.
Wegner is an extreme case and has since been expelled. But the left party's passion for higher wages and job protection, for more taxes on the rich and an end to privatization, amounts to a political program that had seemed dead in Europe since the collapse of communism.
But now as German big business is battered by scandal, the left's message is striking a populist chord. Interior Minister Wolfgang Schauble suggests that public trust in Germany's social-market economy is being undermined by "a not inconsiderable proportion of the economic elite."
With the largest population and the biggest economy in the 27-nation European Union, Germany's troubles weigh the more heavily, particularly as the winds of recession start to threaten from across the Atlantic. Forecasts of EU growth this year have been cut back sharply to below 2 percent, and to barely 1.5 percent in Germany as the country's fabled export industries struggle with the strong euro.
Ironically, Germany's left party has grown despite a steady fall in unemployment from its high of 5 million to 3.8 million last year. But while jobs have been more plentiful, earnings have been stuck, and are likely to remain so, according to Hans-Werner Sinn, president of the Ifo think tank and one of Germany's top business economists. Last week he urged labor unions to hold back on pay demands to stop costs from rising further.
"The strategy of moderation on wages and prices has helped us," Sinn commented. "Unfortunately, we'll need wage restraint for a long time yet because the forces of globalization besetting us across the planet with low wages are not going to decrease."
The combination of a slowing economy, tax and corruption scandals and a resurgent left party is potentially toxic, and many Social Democrats think their party could be one of the biggest victims.
The SPD began to lose support when its last Chancellor Gerhard Schroeder launched cost-cutting reforms of the labor market and welfare system that dismayed his own left wing. And the party then went into coalition as the junior partner with CDU leader Angela Merkel, which opened the way for the left party to present itself as the only effective opposition.
As a result, many in the SPD think it's time to leave the coalition and start reviving the old populist rhetoric of the left in time to take advantage of the coming slide into recession. If that happens, the effect on business confidence across Europe could turn the talk of recession into a self-fulfilling prophecy.
