Cablegate: Germany/Bavaria: Upheavals Threaten Csu Revival Hopes

DE RUEHMZ #0324/01 3521413
O 181413Z DEC 09



E.O. 12958: N/A

SUBJECT: Germany/Bavaria: Upheavals Threaten CSU Revival Hopes

REF: Berlin 1601

MUNICH 00000324 001.2 OF 002


1. (SBU) Accusations of misleading the public and mismanagement
threaten the reputations, if not the jobs, of both Defense Minister
Karl-Theodor zu Guttenberg and Bavarian Finance Minister Georg
Fahrenschon, two young men on whom many in the Christian Social
Union pin their hopes for the future. Both are under great pressure
for separate affairs that started well before they took office but
which envelop them now. While the Defense Minister continues to
struggle with Bundestag (parliamentary) questions of war and peace
and what really happened with the tanker truck bombing in Kunduz
(REFTEL), there was tumult on December 15 in the Bavarian Landtag
(parliament) over the BayernLB - Hypo Alpe Adria Bank fiasco that
will cost the state 3.75 billion Euros. The Bavarian SPD called for
new elections, which seem unlikely at this point, but Minister
President Horst Seehofer cited that threat in a CSU party meeting to
get the attention of his cohorts, who are planning to start a
campaign this spring across the state to reintroduce the CSU as a
rejuvenated party. End Summary.

A Loss of Face for the CSU Youngsters

2. (SBU) Defense Minister Zu Guttenberg and Bavarian Finance
Minister Fahrenschon are accused of having suppressed information,
albeit in two very different cases. Zu Guttenberg is under fire
over how he has handled the case of bombed fuel tankers in Kunduz
(REFTEL). Fahrenschon allegedly concealed reports that would have
uncovered mistakes of fellow CSU members in the acquisition by the
state-owned bank ("Landesbank") BayernLB of the already deadbeat
Austrian bank Hypo Group Alpe Adria (HGAA). In both cases, although
many of the "mistakes were made" before the ministers took office,
subsequent events have created fresh problems.

Zu Guttenberg has Touched the Third Rail

3. (SBU) MP Seehofer and the entire CSU executive committee backed
up zu Guttenberg after he reportedly gave a spirited defense of his
efforts in the Kunduz affair at a closed meeting of the CSU board on
December 14 in Munich. CSU support in Bavaria might not help zu
Guttenberg much on the federal level, but his popularity among
Germans in general seems unbroken anyway. In a survey of the ZDF
TV, released December 11, zu Guttenberg still ranked first among the
ten most popular German politicians. Nevertheless, zu Guttenberg is
in a perilous position, and his story is wrapped up in the larger
question of whether Germany is "at war" in Afghanistan, perhaps the
most difficult issue for the German public to debate.

"3.7 billion Euros could have been 5000 teachers"
--------------------------------------------- ----

4. (SBU) Closer to home, the Landesbank investment disaster has
Bavarians hopping mad over "what all that money might have bought."
The loss represents about ten percent of the Bavarian annual budget.
Parliament almost erupted in fisticuffs on December 15 and the tone
of the debate was more raw and personal than the Chairwoman, Barbara
Stamm (CSU), could tolerate. Finance Minister Fahrenschon, who was
not involved in the original decision, is widely seen as the best
economic and financial expert in the CSU stable but he has also been
questioned about allegedly withholding inspection reports in the
Landesbank affair. Minister President Seehofer is speaking of
personnel consequences and the media and public are focusing, for
now, on members of the old Stoiber (CSU) administration, which
approved the HGAA deal in 2007.

Terrible Time to Launch a Renewal Campaign

5. (SBU) All this comes just as the CSU is planning a campaign to
reposition itself as a younger, more relevant party in Bavaria.
Senior CSU politicians and state government officials told the
Consul General and Political Officer in a series of recent
conversations of complex CSU plans to engage constituents and the
general public in over 100 district town hall meetings, starting
early this spring. Senior CSU leaders would ask participants to
suggest new ways to reach a younger and more heterogeneous Bavarian
voting public. The results of these discussions would inform a
reform of the party's overall approach. Ongoing, difficult
Afghanistan and banking discussions could dominate and overshadow
the meetings.


MUNICH 00000324 002.2 OF 002

6. (SBU) Zu Guttenberg and Fahrenschon seem unlikely to tumble, for
now, but their so-far flawless careers have been tarnished by
serious problems. This could make it harder for the CSU to use them
effectively in efforts to create a new, "youthful" image of
competence and relevance. Particularly the Landesbank disaster
undermines the CSU's efforts to burnish its economic credentials as
compared to its coalition partner FDP, but Finance Minister
Fahrenschon is the CSU's only credible economic and financial
expert. Even if the major mistakes were made before their time,
public opinion will connect the dots between the affairs and the
ministers' names. Should zu Guttenberg's and Fahrenschon's images
suffer long-term damage, they might not be as attractive for future
top positions in the CSU and then the CSU would have a serious
personnel problem.

7. (U) Consulate General Munich coordinated this cable with Embassy


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