Scholz appeals to Brussels for industrial rescue as election looms

Olaf Scholz has written to Ursula von der Leyen demanding the European Commission slash regulation, delay climate reporting rules and subsidise electricity prices for industry. The letter, obtained by POLITICO, arrives less than two months before a snap federal election that polls suggest the chancellor will lose. His Social Democratic Party sits at 17 percent, trailing the Christian Democratic Union on 30 percent and barely ahead of the far-right Alternative for Germany.

A formal pitch for deregulation and subsidies

The three-page letter reads like a manifesto for industrial rescue. Scholz calls for a two-year postponement of the Corporate Sustainability Reporting Directive, which since 2023 has required large companies to disclose climate risks and environmental impacts. He wants fines waived for carmakers that miss the EU's 2025 fleet emission targets. And he asks for subsidised electricity prices to shield energy-intensive sectors from cost disadvantages against competitors in the United States and China.

None of these demands is new. Scholz's coalition made similar requests last year. But the formal address to von der Leyen, a fellow German and former defence minister in a CDU government, marks an attempt to recast the chancellor as a pro-business pragmatist with a plan for Germany's stagnating economy. The Bundesbank has cut its 2025 growth forecast to 0.2 percent, the weakest among major euro-area economies.

Conservatives cry plagiarism

The response from Scholz's conservative opponents was immediate and scornful. Hildegard Bentele, a CDU member of the European Parliament sitting in the European People's Party group, said the chancellor "seems to be slipping into schizophrenia toward the end of his term of office." She argued his suggestions are "almost 100 percent EPP policy" and wondered "where he was last year" when von der Leyen presented her programme for a second Commission term.

Julia Klöckner, the CDU's economic policy spokesperson in the Bundestag, was equally blunt. She called the letter "a helpless election campaign manoeuvre" that "lacks credibility." The criticism cuts to a genuine tension: the EPP ran on simplification and competitiveness in the 2024 European elections, securing von der Leyen's reappointment. Scholz's letter now adopts that language weeks before Germans vote.

An economy caught between Washington and Beijing

The economic backdrop explains the urgency. Germany's export model faces simultaneous pressure from both its largest trading partners. Donald Trump's return to the White House brings threats of universal tariffs on imports. At the same time, Chinese industrial subsidies flood global markets with cheap steel, solar panels and electric vehicles. The European Commission's anti-subsidy investigation into Chinese EVs, pushed by Paris, resulted in provisional duties that Berlin opposed. Scholz's letter again calls for a negotiated solution rather than tariffs.

He also targets the Carbon Border Adjustment Mechanism, the EU's carbon border tax. As designed, CBAM imposes levies on imports that do not meet European climate standards, protecting domestic producers. Scholz argues it needs reworking to boost the attractiveness of energy-intensive European products such as steel. The distinction matters: the current design shields incumbents; his version would aim to make European exports more competitive abroad.

Franco-German friction and unexpected alignment

The Chinese EV duties expose a familiar Franco-German split. France demanded the investigation; Germany warned of retaliation against its carmakers, which earn roughly a third of their revenue in China. Yet on emission fines, the two governments found common cause. Alongside Italy and the Czech Republic, they pushed the Competitiveness Council in November to demand a waiver for manufacturers missing the 2025 targets.

"We didn't agree on everything, but we agreed that we have a problem," a French government official said of the negotiations. "We basically converged on the fact that we would act together on the Competitiveness Council to put forward the issue of the fines." The official spoke anonymously because they were not authorised to comment publicly. The alignment is tactical: Volkswagen, Renault and Stellantis all face potential penalties running into hundreds of millions of euros.

Industry dismisses the letter as talk

The reaction from Germany's car lobby, the Verband der Automobilindustrie, was dismissive. "Germany is at the top when it comes to tax and bureaucracy burdens," the VDA said in a statement responding to the letter. "It is not enough to just talk about reducing bureaucracy. And not only in Germany, but also in Brussels, this is where most of the new bureaucratic costs are now being incurred." The intervention underscores a structural complaint: national leaders negotiate directives in the Council, then blame Brussels when compliance costs land on companies.

The VDA's critique extends beyond the letter. Germany's corporate tax burden remains among the highest in the OECD. Energy costs, while off their 2022 peaks, stay elevated relative to US competitors. Permitting for new industrial projects takes years. Scholz's letter addresses none of these domestic levers.

The reporting rules battle

The Corporate Sustainability Reporting Directive has become a flashpoint for the broader deregulation agenda. Adopted in 2023, it phases in requirements: first for large listed companies, then for other large undertakings, and eventually for listed SMEs. Scholz's coalition ministers wrote to the Commission in December requesting a delay. Former finance minister Christian Lindner went further, arguing Berlin should seek abolition. Former French prime minister Michel Barnier suggested a moratorium.

Von der Leyen has already signalled simplification. Her second-term guidelines, negotiated with the EPP, promise a "major simplification" of sustainability reporting. The Commission's omnibus simplification package, expected in the first quarter of 2025, will likely propose threshold changes and timeline extensions. Scholz's letter arrives as a political bookend: he wants credit for an outcome the Commission is already preparing.

A timeline running out

The election is scheduled for 23 February. Coalition talks will follow. A CDU-led government under Friedrich Merz would likely pursue a similar deregulation agenda but with greater parliamentary credibility and a stronger hand in the Council. The Commission's omnibus package lands before then. The emission fine decision requires a qualified majority in the Council and European Parliament approval, neither assured. The CBAM review is legally mandated for 2026. Scholz's letter asks for decisions on timelines he will not control.