The Millionaire Party Germany's Free Democrats Accused of Serving the Rich

Tax cuts for hotel owners, Health Ministry jobs for insurance lobbyists: Germany's Free Democrats, junior coalition partner in Chancellor Merkel's coalition, are reviving their reputation as a party of the wealthy. By SPIEGEL Staff

The cleanup of their election-night party was hardly complete before officials at FDP headquarters discovered their next reason to celebrate. Sixteen days after the business-friendly party's resounding success in Germany's September parliamentary election, it received a €300,000 ($430,000) contribution from a Düsseldorf-based company called Substantia AG. But it wasn't the company's first contribution. Between October 2008 and October 2009, Substantia deposited the impressive sum of €1.1 million into FDP accounts, in what was one the largest political contributions in party history. Yet another superlative had been added to the Liberals' year of superlatives.


Photo Gallery: The FDP and Friends

Foto: Klaus-Dietmar Gabbert/ picture-alliance/ dpa

The generous Substantia AG is part of an empire owned by one of Germany's richest citizens, August Baron von Finck, 79, who for years has shielded a portion of his billions in assets from the German tax authorities at his castle in Weinfelden, Switzerland. The Finck family, which derives some of its wealth from the hotel industry, holds the majority stake in the Mövenpick Group, which operates 14 hotels in Germany.

When the last payment was deposited into the FDP account on Oct. 13, party leaders had just begun negotiations with Chancellor Angela Merkel's Christian Democrats (CDU) and their Bavarian sister party, the Christian Social Union (CSU)in Berlin over the new administration's coalition agreement and reforms for Germany following the late September general elections which returned Angela Merkel to the Chancellery. These negotiations ended in an agreement that included a windfall for hotel owners throughout Germany: a reduction in the value-added tax for hotel stays from 19 to 7 percent. It was a gift to the industry worth billions and a classic case of client politics. The baron was pleased.

'Party for the People?'

In the election on Sept. 27, the FDP captured close to 15 percent of the vote, the most impressive result in party history. The longer the Liberals celebrated on election night, the bolder was the language being used at party headquarters in Berlin. Some were even convinced that the FDP would overtake the Social Democrats in the next election. Party Chairman Guido Westerwelle announced that from then on the Liberals would be a "party for all the people."

Less than 100 days after the FDP became part of the new coalition government, the self-adulation has given way to reality. The promise of a new big-tent party has proved to be a disappointment, now that the FDP has returned to its former self -- as Germany's most consistent client party.

While ordinary citizens must adjust to leaner times, which will include such hardships as reductions in pension benefits and higher health insurance premiums, the classic FDP base can look forward to a relatively rosy future. For pharmacists, tax accountants, financial service providers, private patients, hotel owners, pharmaceutical companies and wealthy heirs, it took only weeks to realize that they stand to benefit from the Liberals being in power.

There was a time when the FDP sought to shed its image as the "party of higher earners," a term that slipped into a strategy document drafted by the hapless former party leader Klaus Klinkel in 1994. Although the phrase was quickly purged from the documents, it wasn't forgotten.

Westerwelle, aware of the explosive nature of the expression, was determined to come up with a different term. But since the party returned to power in the fall, Kinkel's message has become a leitmotif for the Liberals, after all. Since then, hardly a week has passed without some new giveaway being handed to the party's base, triggering a festive mood among German tax accountants, pharmacies, hotel owners and asset management companies.

Yielding to Temptation

One could call it a coincidence that the party's biggest donors happen to come from precisely those corners of society. On the other hand, it may not be a coincidence at all. "With the FDP's entry into the national government, corporate lobbyists are gaining influence," says Elmar Wigand of the group LobbyControl. Shortly before his death last December, former FDP Chairman and longtime Liberal Otto Graf Lambsdorff warned his party against yielding to this temptation. The FDP, he said, could not lose its "appreciation for compromise," nor could it give in to "relentless pressure from lobbying groups."

But his words were quickly forgotten. "The FDP is pursuing pure client politics in the administration. It addresses the tax concerns of a certain class, but that's it," says Hildegard Hamm-Brücher, the former grande dame of the Liberals. The FDP is everything but a party for all the people, she adds, because it offers no solutions for society's most pressing problems. "If it doesn't change its course, the FDP will not capture more than 10 percent of the vote in the next election."

It is not unproblematic for democracy when parties only feel obligated to the 15 percent of society that voted for them. The Liberals, at any rate, don't seem to have realized yet that they now bear responsibility for 100 percent of society.

It is, of course, part of political competition for parties to develop different key priorities. The Greens have always sought to promote green business, and the Social Democrats paid attention to the concerns of trade unions for decades and the conservatives to those of the churches. But they all eventually realized that as governing parties they have an obligation to the entire country, and that giving preference to their own clientele has its limits. This is what differentiates them from opposition parties.

Top Echelons of Government

But so far the FDP has behaved immoderately, as if it were still in the opposition. It was in that position for 11 long years, and during those 11 years certain industries in Germany had no natural advocate within the top echelons of government. The longer they were forced to wait on the sidelines, the bigger their expectations became. So far, the FDP has not disappointed.

Last week Health Minister Philipp Rösler (FDP) demonstrated the extent to which the Liberals are focusing on their minority. He appointed Christian Weber, a top lobbyist for private health insurance companies, to head a special Health Ministry department dealing with fundamental issues of health insurance.

Until now Weber, the deputy head of the Private Health Insurance Association (PKV), spent his time sitting in his Cologne office, wearing a dark tailored suit and writing a book with a defiant title ("Private Health Insurance Has a Future!"), all the while looking on as the Social Democrats deliberately promoted "a weakening of the PKV." The customers of private health insurance companies were put at a disadvantage by a law enacted by Merkel's previous government, pairing her conservatives with the SPD, under which a three-year waiting period was imposed on high earners wishing to switch their health insurance coverage from the government system to private insurers.

But with the FDP's entry into the Health Ministry, a new era has begun for Weber and his private insurance companies. In their coalition agreement, the Liberals ensured that the waiting period for switching from government to private coverage would be reduced to 12 months. The CDU and the CSU, initially opposed to the plan out of concern for the government health insurance system, eventually gave in.

Even More Changes

The FDP's soft spot for the rich isn't difficult to trace -- up to 50 percent of its members are privately insured. Close to half of FDP members consider themselves part of the upper-middle or upper class of society.

In his new policy-shaping position at the Health Ministry, Weber will likely add even more changes to health care. His appointment fits with the image of a party that is extremely headstrong when it comes to setting its political priorities. Close to 90 percent of Germans are enrolled in the statutory health insurance system, while only 10 percent enjoy the privileges of private insurance.

Criticism from Merkel's Conservatives on the Rise

Rösler's next goal is to make the pharmaceutical industry happy. To do so, he will first have to eliminate Peter Sawicki, the head of the Cologne-based Institute of Quality and Efficiency in Health Care (IQWiG). The institute and its director have long been a thorn in the side of the pharmaceutical industry, which sees their critical assessments of the efficacy of new drugs as a threat to sales. Whenever Sawicki's staff discovers that a drug is ineffective or disproportionately expensive, it publishes the results and recommends that the statutory health insurance companies refuse to approve the costs of the drug.

That will soon change, if the FDP and the pharmaceutical industry have their way. This week, representatives of the health ministry, doctors, the statutory health insurance companies and hospitals on the board of IQWiG will decide whether to extend Sawicki's contract.

Many experts have now publicly voiced their support for the professor. "The institute performs an important function for patients and citizens, because it truly creates transparency with its evaluations," says Wolf-Dieter Ludwig, chairman of the Drug Commission of the German Medical Profession.

But this doesn't seem to impress the FDP health minister, who wants to see the institute take a new direction -- with a friend of the pharmaceutical industry at its helm. Half a year ago, in his former post as the economics minister of the northern state of Lower Saxony, Rösler supported a decision by the Conference of German State Ministers that characterized the institute's methodology as being "economically unacceptable." According to the conference, new criteria were needed in the cost-benefit analysis of drugs. "These include competitiveness," the ministers stated, "particularly of domestic pharmaceutical companies."

Thanking Their Liberal Friends

The fight against the unpopular director, Sawicki, has become increasingly unsavory of late. Some critics now claim that he used institute funds to pay for personal expenses, and there has also been talk of a scandal involving the use of official vehicles. In his defense, Sawicki says that the accusations could amount to such relatively minor infractions as his having submitted tax receipts on which the points of departure and arrival were not specified. A committee has been formed to look into the accusations.

While the pharmaceutical industry gets its hopes up, many other industries can already thank their Liberal friends for the work they have done. At the head of the line are hotel owners who, as a result of the reduction in the value-added tax, will receive an annual benefit worth at least €1 billion a year.

Ernst Burgbacher, the tourism spokesman of the FDP parliamentary group, sponsored the legislation to approve the de facto subsidy. It mirrors a concept by the German Hotel and Restaurant Association, which is headed by Burgbacher's fellow FDP member from the southern state of Baden-Württemberg, Ernst Fischer. The two men are already working on their next coup: a reduction in the value-added tax for restaurant owners. Economics Minister Rainer Brüderle has already agreed to support the measure.

The FDP has also devised a tax giveaway for another segment of the population: heirs. Siblings, nieces and nephews of the deceased will now pay taxes of between 15 and 43 percent on their inheritance. The previous rates ranged from 30 to 50 percent.

More than Happy to Help

Those who hire a tax accountant to prepare their tax returns, hoping to reduce their tax liability, could also be getting a bonus. The FDP wants the costs of private tax preparers to be made tax-deductible once again. This benefits all high earners and, of course, the tax accountants themselves, who have traditionally been strong supporters of the FDP.

The Liberals have not forgotten some of the other groups they favor. Were independent pharmacists complaining about mail-order pharmacies and drugstore chains making incursions into their market? The FDP was more than happy to help out, with a proposal to ban such competition in the future. Was "Haus und Grund" ("House and Property"), an association of real estate owners, dreaming of gaining the power to evict tenants more quickly in the future? The FDP, eager to oblige, announced a proposal to amend the law of tenancy to adjust periods of notice for landlords and tenants in the future.

There is nothing new about this pattern of behavior. But whereas the state was able to cope with Liberal idiosyncrasies in the saturated 70s, 80s and 90s, they now feel like a provocation.

The party leadership has yet to engage in a self-critical discussion about the FDP returning to its old ways. The term client party has only been heard more frequently within the Junge Gruppe, an association of young FDP members of parliament who would like to see their party expand its base. Now they fear that their efforts have been in vain.

'Obligations to the Entire Country'

If the young FDP members of parliament are to receive any support, it will have to come from the CDU/CSU. There is growing resentment within conservative ranks over the egotism of their coalition partner, even though the FDP has gladly included a few giveaways to the CDU and CSU in its lawmaking efforts. But only now are the conservatives realizing how many favors to lobbyists the FDP managed to slip in during the coalition negotiations.

"The FDP must finally become aware of its obligations to the entire country," says CSU General Secretary Alexander Dobrindt. "It cannot simply pursue a policy of lobbying for its core constituency."

For CDU politician Wolfgang Bosbach, it has become a source of constant irritation to open the paper and read that the Liberals are determined to stick to their guns when it comes to substantial tax cuts. "At face value, it seems admirable for the FDP to say that it isn't backing away from its campaign promises," says Bosbach. "But at some point the party will have to ask itself whether those campaign promises are consistent with reality."

By Katrin Elger, Markus Feldenkirchen, Alexander Neubacher, René Pfister, Barbara Schmid and Merlind Theile

Translated from the German by Christopher Sultan