So who's really pulling the strings? And how did we get here?
On Monday, Germany overturned a deal on car emission limits in some very unusual circumstances, somehow convincing several other member states to switch positions on a deal that had already been agreed in June.
On Tuesday, it was revealed that Merkel's Christian Democratic Union (CDU) party received a donation of €690,000 from the Quandt family, which owns 46.7% of BMW, just days before Monday's fateful meeting. The revelation has prompted German media to dub Merkel "the car chancellor" and question whether hers is a pay-for-play government.
A gift from a partial stakeholder of an automaker might not have raised eyebrows were it not for the very heavy-handed and unusual way Germany has gone about trying to avoid this emissions limit at the last moment - a limit the industry has known was coming since 2008.
In terms of how Germany has worked to change this EU proposal, the country has technically not violated any rules. But Berlin has become involved in this legislation at two highly inappropriate times that are outside the normal legislative procedure – during the Commission drafting of the proposal and during a vote to rubber-stamp an already-agreed deal.
The 2020 emission limit for the fleet average – 95 grams of CO2 per kilometre – was set in the original 2008 legislation, which also set a 130g/km limit for 2015. However the 2020 target had to be confirmed in new legislation, and as the Commission readied this proposal last year Germany became heavily involved. According to EU sources Berlin leaned heavily on the Commission to adjust the ‘slope' in the calculation method for how to determine the fleet average in a way which would benefit makers of larger, heavier cars. German automakers just happen to specialise in this type of car.
The issue went to the highest levels of the Commission, and Germany mostly won. They got the slope they were after.
But they didn't get the expansive 'supercredit' scheme they wanted. So as the proposal worked its way through the legislative process, Germany pushed to expand the scheme, which allows electric vehicles to count multiple times toward the fleet average. This would benefit makers of heavier cars, by having them be balanced out by producing a few electric vehicles. This scheme, decried by environmentalists, exists now but is scheduled to end in 2015. The Commission proposed to re-introduce it for the 2020 target, in a limited way. Germany pushed to greatly expand it.
But Germany lost. Its efforts were defeated in the European Parliament and in the Council of Ministers. Germany was outvoted by qualified majority in the Council, and the Irish presidency was given a mandate to negotiate that did not include a demand to expand supercredits.
Ireland concluded a deal with the European Parliament based on this mandate in June. But just days later, Germany leaned on the Irish presidency to delay a vote to rubber-stamp the deal. This reportedly involved a personal intervention by Merkel to Irish prime minister Enda Kenny. And it left the civil servants who had been working tirelessly to finish this dossier by the end of the Irish presidency on 1 July furious.
Given that Germany only had support to delay a vote on the deal, not to reject it, most people expected that after the German general election on 22 September they would give up the ghost and allow the deal to pass. They were wrong.
Just a week after the election, German diplomats stunned their counterparts by circulating a new proposal to change the legislation at the competitiveness council – delaying the 95g/km by four years, with a phase-in to 2024. It was a highly unusual move considering this would require tearing up the deal that had been reached.
But somehow, Germany was able to convince several member states to reverse their backing of the original position and support it in saying the deal was no longer acceptable. The UK, Poland, Hungary, Slovakia, Estonia and Portugal all suddenly decided to back Germany. France, which along with Italy had been adamantly opposed to Germany's earlier attempt to expand supercredits, suddenly went quiet.
Speculation has been rife as to why the other countries flipped. Did the Eastern European countries give in after pressure from German carmakers that have plants located there? Did Portugal agree to come on side in exchange for help with its debt refinancing in July? Did the UK agree in exchange for German support in resisting EU efforts to regulate the banking sector? None of the countries that switched sides can explain why they did so.
Reports in German media speak of personal calls made by Merkel and her top aides to Paris, London, Lisbon and Budapest. That the chancellor has been devoting so much time to this at a time when one would think she would be focused on coalition talks for forming a government is a bit perplexing. Why is this so important to her? If Merkel is leaning on the other EU member states, who is leaning on Merkel?
I have a feeling that this story has more strange twists and turns yet to come.