Free phones, football games, and all-expense-paid trips to China. These are the types of goodies you can expect if you're a European lawmaker as gifts from Huawei, the Chinese telecoms giant. all part of its lobbying pitch. But now it's looking like that generosity may have veered into corruption. With police raiding homes, sealing the offices of parliamentary assistance, and making arrests of lobbyists connected to Huawei.
This latest bribery scandal is a juicy story with major implications for geopolitics, cybersecurity, and voters' ability to trust Brussels. People have been pretty paranoid about Huawei's ties to the Chinese Communist Party since the first Trump administration put pressure on European governments to literally cut the cable. And now a set of criminal allegations is only fueling suspicions of nefarious interference and dirty lobbying. But wait a second.
Didn't the parliament implement a whole bunch of reforms after that other cash for influence case called Qatargate? Just how far did Huawei's influence reach into the heart of EU politics? And why doesn't Brussels seem to be capable of cleaning up its own house? I'm Sarah Wheaton, host of EU Confidential. Later in the episode, we'll look at the fall of the... other Berlin Wall. The legal blockade holding back a surge in defense spending. The Bundestag just took a historic step.
rewriting Germany's constitution to ditch fiscal orthodoxy and borrow big for the military. That puts the famously frugal country on the same page with the rest of Europe. National leaders gathered in Brussels this week to consider how to beef up the continent's defense industry in the wake of Trump's withdrawal. But first, okay, you can tell I love a good scandal. Let's talk about the latest gate rocking Brussels, this time involving Huawei.
Okay, I am joined here in the studio by cybersecurity editor Lawrence Rullis. Lawrence, thanks for being here. Hi, Sarah. And cybersecurity and intelligence reporter Antoinette Aroussi. Thank you so much. Thank you, Sarah. Antoinette, let me start with you. We have yet another bribery scandal in the European Parliament. I put out a call for names of what to call it. It involves Huawei, and my favorite suggestion was instead of Huawei Gate, calling it Gateway.
So lead us through this gateway. What happened? Yeah, so last Thursday, police raided 21 addresses in Brussels, Flanders, Wallonia and in Portugal and arrested several people. Investigators are looking into the activities of 15 former and current MEPs, according to several investigative outlets, including Lessoir and Follow the Money. And the publications reported that...
At least one senior lobbyist, a Huawei senior lobbyist, was involved. We've yet to confirm this, but what we do know is that their offices in Brussels, which are just across the park from the European Parliament, were also raided. One of our reporters was actually on the ground and she saw at least four policemen walk out with boxes of stuff. Okay, so what's the sense of what's behind all this? How did this all get started?
Belgium's intelligence services were looking into Huawei's influence in EU institutions and NATO headquarters. And they actually tipped off the prosecutor more than two years ago now. From there, the prosecutor took on the case and has been investigating this sort of influence campaign by Huawei lobbyists, which have strong links with the European Parliament. And Lawrence...
When a lot of us heard about these raids and investigations into Huawei, we were not surprised and we just kind of automatically knew what was... behind it, but for people who are not paying as much attention to teleco policy or even geopolitics, what's the deal with Huawei and why has it been under so much scrutiny across Europe for years now?
So I think Huawei has been a wild story for the Brussels bubble for the past couple of years. It basically started as a geopolitical story back in 2017, 2018. That's when the scrutiny really... dialed up and what you had was the US government was putting pressure on European governments to actually intervene and make sure that European telecom networks weren't as reliable on Chinese equipment as they were before. So why? I mean, who cares? The concern is that by being very reliant on...
Chinese telecom equipment, you expose yourself to a couple of risks. And one very concrete risk would be the risk of cyber espionage. So the risk of data being surveilled or data being snooped on through vulnerabilities or through compromises. through Huawei. Another risk is one that involves sort of Chinese espionage law, which essentially allows the Chinese government to request China-based companies or Chinese companies to hand over data to the authorities or to security.
services in China. Those are two quite specific surveillance and security risks. There's also a broader risk of economic reliance. Similar to what we've seen with Russia and Europe being reliant on Russian gas, that has a political risk involved. And so what the argument is of sort of the security hawks and the China hawks, both in the US and then increasingly in Europe.
is that by being so reliant on Chinese equipment for your critical digital infrastructure, that exposes you to political risk when it comes to trade with China and other diplomatic engagement. Okay, yeah, so we've seen U.S. pressure and other factors leading national governments to basically say, ugh, even though this Huawei equipment is cheap and the customer service is pretty good, we're going to stop using it for our 5G.
services and kind of cut it out of government services. So there were existential issues. for Huawei here. And so now, back to these accusations, Antoinette, what are Huawei lobbyists accused of? So this week four people were charged on counts of corruption and criminal organisation and they're going to remain in detention.
And a fifth person was charged with money laundering and they were released under certain conditions. Again, we're not sure who these people are, but in some way, shape or form, they have had... let's say, an inappropriate relationship with European politicians and Huawei. On top of that, earlier this week, new raids happened at the European Parliament. Brussels. And this follows several of these offices having already been sealed to sort of contain the information within Parliament's premises.
You know, we've been referring to bribery. Do we have kind of a broad idea of what was exchanged? So we know what the prosecutors said. The prosecutors said it involved expensive gifts. It also involved invitations to football matches and what they're calling remuneration for...
political positions. That is quite a vague term, but that is what is on the official record. The other thing we know is what essentially these three publications that broke the story have been reporting, which is that it would involve things like smartphones being... handed to officials and just to step back for a little so
Huawei in Brussels has been a formidable lobbying force in the last decade or so. It used to be known for throwing a lot of money at their lobbying efforts, throwing very lavish parties. the most swanky locations in Brussels to hold their New Year's, their Chinese New Year's party. And they used to give gifts as part of their, what you can say, sort of public relations or company relations on a very regular basis. There were also trips.
from Brussels and Europe with in part officials and then also things like press trips to their headquarters in Shenzhen in China. I actually visited in 2019 and for the record, Politico paid every single dime of that trip. But that is essentially what they were doing in Brussels. Now...
As this investigation breaks and as Belgian police starts looking into these activities, what's interesting is that we're getting sort of a flashback, right? We're sort of being thrown back in time and are revisiting everything that we've seen happen between.
sort of 2019, especially 2021 when investigators say the inappropriate or the active corruption started at the European Parliament. And now it's sort of a matter of, you know, looking at the track record. What has Huawei really done in Brussels?
Also, what is the scale of the corruption that we're talking about here? And so all of these questions are still being investigated now. But what is super interesting is that this essentially means that Huawei as a... lobbying force as a corporate presence in brussels that is voicing its opinion about chinese trade policy about european telecom security about issues like climate policies issues like sustainability policies
It was a very strong and impactful lobbying player. And what it looks like is that a corruption scandal of this scale really sort of drives a dagger through that lobbying effort and essentially means that the company itself, politically, at least for... now seems to be dead in Brussels. Yeah, I mean, we've seen some reactions coming out of the parliament. Antoinette.
Yes, so the European Parliament and Commission last week blacklisted Huawei lobbyists from the premises after these allegations of bribery came up. So that was a very decisive, kind of quick reaction. which Parliament specified as a precautionary measure. And since then, pressure has begun mounting on Parliament President Roberto Mizzola to actually sideline lawmakers that are potentially linked to the bribery probe.
And this week, a letter signed by 28 members of the parliament asked Metzola to do that, saying that they can't exactly ignore the potential threat that these people pose to the independence and credibility of the institution. Yeah, and Lawrence was just talking about how this is a flashback to an earlier era of Huawei's lavish.
public affairs efforts. But it's also, for me, a flashback to an earlier bribery scandal, Qatargate. And that was when we saw allegedly officials working on behalf of the Qatari and Moroccan governments basically trading cash in exchange for sort of public statements and other policy favors to support these governments' agendas. Antoinette, where do you see the parallels?
Yeah, I mean, it's just over two years since Katargate happened and it's so fresh in many people's minds still, especially because... I mean, where did that investigation go? The people involved weren't really charged with anything. They were charged, but I mean, nobody has been convicted of anything. Right. So, you know, it is sort of deja vu. And even though Katargate allegedly...
triggered, you know, different response from the European Parliament on sort of more transparent lobbying practices. There are still a lot of MEPs. I mean, I yesterday went through some of these MEPs pages and they need... So, sure, perhaps there's a bit more awareness, but has anything actually changed?
So what this has done now is that it basically has revamped all the discussions that we've seen come out of Qatargate about how to increase the transparency of the European Parliament, how to put in place systems that make sure that MEPs are not accepting gifts.
in exchange of favors, basically increasing sort of the scrutiny and increasing the transparency on European Parliament members who again sort of seem to be involved in shady practices. But Sarah, I mean, you were there, right? You were covering the Qatargate scandal from...
up close. So do you see sort of the echoes of that scandal today? Yeah, I mean, I was covering lobbying and the reaction that the parliament had to Qatargate. And of course, they famously put in place this 14-point plan that includes... boosting transparency, insisting that not only every member of parliament, but also their assistants needed to list their lobby meetings. So as Antoinette noted, Some of them are still not actually doing it. And I think that gets to.
The heart of the issue, which is enforcement, they actually have always had pretty decent rules in the European Parliament, but no member of the European Parliament has ever been kind of punished for not following them. That appears to still be the case. On the other hand, Parliament President Roberta Metzola said earlier this week that, in her opinion, it was...
post-Katargate reforms that allowed them to initiate this case. And we're seeing this police action because of, she didn't really go into detail, but arguably kind of a bit more transparency, a bit more proactive engagement with. police authorities. So indeed, this might end up being sort of an important...
test case for whether the parliament has learned anything from Qatargate. That's the parliament lesson learned maybe from Qatargate. The other question we have is Belgian prosecutors. Also, as Antoinette mentioned, you know, we haven't really seen many results. It's two years on from Qatargate. There was kind of a messy investigation that keeps dragging on. Do we have any sense that Belgian prosecutors kind of have their act together? Lawrence?
As a Belgian, I'll give that one to you. As a fellow Belgian. Exactly, as a fellow Belgian. I think for Belgium, it's another really interesting test case. And, you know, obviously the country is under a lot of pressure because it hosts the NATO headquarters. in Brussels. It hosts the main EU institutions in Brussels.
And the government in Belgium and its security and intelligence services are in charge of making sure that there is proper investigation, there is control, there is policing, and there is intelligence work around what's happening in Brussels.
What we're seeing is that the investigators so far has kept a really tight ship. So they are protecting this investigation quite closely. They're going through the steps in a very methodological way. I think what Belgian prosecutors are trying to... prove is that they can successfully
manage this case, that can successfully bring this case to the finish line and prove to the European Parliament, the European community effectively, that they are capable of making sure that things like corruption do not happen around the European Parliament. because of all the really serious leaks that happened during the Qatargate investigation to journalists, to the defence and many...
People believe that that actually scuppered the final result and that's why today we haven't had the convictions that we needed. So this time what we're seeing is that the prosecutor is... really holding on tight to that information and the judges sending notices around saying absolutely no one talked to press, no leaks, we've got to keep a lid on it.
Indeed, a bit of a bittersweet outcome because, you know, on the one hand, we like accountability, but we also love leaks. So a bit sad for us. Antoinette, for the record, of course, we've asked Huawei for their reaction to this. What do they say? They said that they take these allegations seriously and will urgently communicate with the investigators to further understand the situation.
And it's also safe to say that every assistant and MEP that we've had any whiff of involvement that we have asked for a reaction for has denied any wrongdoing. Yes. Last question. Lawrence, I'll kick this one to you. As we started out, it was really the Trump administration and his sort of crusade against Beijing that has motivated Europe to really rethink its relationship with Huawei.
Could this be maybe an olive branch to the White House? I mean, I think the White House has very big things on its plate right now, trying to juggle a ceasefire deal with Ukraine and being very active on the Israel-Gaza conflict. What is... clear is that there's always been sort of an interesting diplomatic sort of back and forth between Washington and both Brussels and national capitals in Europe. And so any signal that sort of suggests a tougher stance on Huawei, which is, you know...
Don't forget, this is one of China's absolute crown jewels when it comes to technology. It's the company that has sort of defied years of American pressure that cut it off from supply chains, cut it off from American chip technology and blocked its 5G technology. So it is a very important symbol in the US-China.
tech race. And so obviously for European countries, there's a diplomatic upside to cracking down, which is that, you know, it shows willingness to transatlantic partners. Let's see where it goes, because I feel a lot of this is also about cleaning house. Brussels. And a lot of this is also about making sure that the European process and European democracy actually continues to function in a proper way. And so I think that for Brussels is by far the priority.
Hey, Lawrence Antoinette, thank you so much for being here. Thank you, Sarah. Thank you, Sarah. Okay, we need to take a short break. When we return, we'll be bringing sexy back. I love talking about the German defense budget almost as much as I love talking about political scandals. Stay with us. All right. I'm joined over Zoom from Berlin by my Politico colleague, Chris Lunday. Chris, thank you so much for being here.
Yeah, thank you very much. So Chris, back in the day, we used to joke that we were bringing sexy back when we talked about the German budget crisis. So once again, I mean, really this week's news... is like practically pornographic. Like there's been a radical shift. What's going on with the German debt break?
Yeah, so the Bundestag, the German parliament just passed this historic, really historic constitutional amendment, which allows for the German government to take on significant new debt for defense and infrastructure. And it's a pivotal move. because the German state has been very strict about balancing the books. The Germans really do love savings so much, in fact, that they enshrined a limit on debt in the Constitution back in 2009. So now... you know they're bypassing this debt break
for these two critical areas. So it sparks a major shift, especially for the CDU, the conservatives, which has traditionally championed fiscal discipline. And so, yeah, what exactly did they vote on here? On one side, you have defense. So defense spending above 1% of GDP is now exempt from the debt break, which gives Friedrich Merz, the leader of the CDU, nearly unlimited financial flexibility to boost military funding.
And along with that, you have a 500 billion euro special spending fund, which was approved for infrastructure covering roads, railways, energy, digitalization, and really important climate. projects, which will be covered by around $100 billion in that fund. You mentioned Friedrich Merz, the chancellor-in-waiting is what we've called him, but his government is not in place yet. So it seems kind of weird that they had...
This huge vote with a lame duck parliament. What was going on there? Right. Yeah, I think that makes the question of, you know, why there's all this urgency around this vote. I mean, it came really out of nowhere. We're not even a month out of the last election. Germany's parliament had to approve the plan before the new lawmakers take office next week because a two-thirds majority of the parliament is required by constitutional rules.
And in the new Bundestag and the new parliament, the far-right AfD and the left party... were both opposed to the measure, and that would give them enough seats in the new parliament to form a blocking minority. This means they could have stopped the amendment, the spending and infrastructure amendment from passing. So to avoid that, the vote was... pushed through and this was Friedrich Merz's kind of plan.
in the current parliament, where it passed with a strong two-thirds majority, backed by the CDU, the center-right, the SPD, the center-left, and the Greens. And, as expected, the AFD and the left party voted against it. So basically, yeah, it sounds like this coalition that will not be big enough when there's a new government is nonetheless pushing this through. What does this team kind of tell us about the future German governing coalition and how they... might work together. A lot. Matt's...
Ever since he has led the CDU, he's positioned himself as this real get things done leader. With this, you know, he pushed through a massive spending package with the SPD and the Greens, which proves that he can deliver major... And that reinforces his image as a pragmatic leader, you know, that's willing to act decisively. But he has to make big concessions. The Greens secured 100 billion euros of that infrastructure plan for...
climate and digital projects, which is a key win for them. And to be fair, the SPD got backing for a majority of the things in that bill. So for social and economic infrastructure spending, and that made the deal palatable. their base so what the signals for the coalition talks and potentially on a broader scale a government between the cdu and the spd
It shows that they can work together on bigger issues, you know, despite the differences that they have. And Matt's had to compromise, showing that he may not dictate the terms of the future coalition, given that he's had to make so many concessions to the SPD. if that coalition forms you can really expect a pragmatic but kind of uneasy cooperation where mats is leading but he's forced to do a lot of policy trade-offs we have to remember he was
a real fiscal conservative. He wanted to keep the debt limit like really on its two feet and make sure that that doesn't fold. So now that he's made this huge concession, I think the SPD... in their coalition talks right now is really asking what else they can get out of it. And a lot of CDU politicians are asking themselves what else they have to give up and if they should probably straighten out their spine.
This is a huge change for Germany, for Merz. What was the underlying motivation for loosening up this ability to spend on defense? Germany is really responding to a shift in the global reality that we're living in. And on one side, you have the security threats. So Russia's invasion of Ukraine exposed a lot of weaknesses in Germany's military. On another side, you have a lot of US uncertainty. Trump's NATO skepticism has...
pushed Europe to take defense into its own hands. And Germany is a big part of that. So for Germany, this starts with deploying a lot of necessary capital as the first step to a broader shift. And the third point, which is likely a bit more precarious, is the economic struggles that Germany is facing at the moment. We're in a recession. We have an outdated infrastructure as well as a underfunded military.
And that will make investment much more urgent. So freeing up that capital from a public standpoint will likely allow more private capital to come in and hopefully boost the economy a lot more. So, yeah, now there is a lot more money freed up to spend on defense. Have they already been kind of window shopping a bit and deciding what they want to spend that on? It's a real good question. There's a lot of reports out there that speculate on a lot of things.
But we'll say, OK, on one side, you have the defense. So there's a major spending spree. It's prioritizing European made equipment over American alternatives. Very important. However. I've had a lot of conversations with people on this and not that many people really go on the record as to whether they prefer European or American equipment. Oh, interesting. But according to some reports, there are some planned purchases and that should include new warships, more fighter jets.
more missiles and air defense systems, drones and surveillance tech, and cybersecurity and satellites. And on the infrastructure side, Germany is really building from the ground up. So they're investing in railways, roads, bridges. energy infrastructure and digitization.
Okay, well, for anybody who's taken Deutsche Bahn lately in the past few years, I'm sure they will be glad to hear that there's going to be new money going into that. Beyond my personal priorities to make travel easier, how are Germans feeling about this? I mean, as we said. This was really just rushed through, maybe even despite the message from a good chunk of voters. Generally, I would say public sentiment is pretty good. A majority of Germans support the decision.
especially when it comes to the infrastructure bill, because... they will essentially see that in their day-to-day lives. But the support is slightly lower in the East than it is in the West. And this does run parallel with the fact that the AFD and the left party are much more popular in the East than they are with the West. No surprise, because the AFD has been giving the CDU a lot of backlash.
From the CDU side, the voters actually couldn't really be more happy about this money being released. There's strong support for the package, especially on the infrastructure side, with 83% supporting it, according to one survey. But concerns linger about the long-term debt. Some traditional conservatives, I think, worry a lot that this move contradicts the CDU's fiscal discipline.
The U-turn in Berlin really aligns with the U-turn that we're seeing also in Brussels. This week, we also heard Ursula von der Leyen giving more details about her vision for a made-in-Europe defense. supply chain, also fleshing out plans for maybe even taking out joint debt to spend $150 billion more on defense at the European level. So, you know, what parallels are you seeing between Merz's
Well, I think that where they're very well aligned, both the EU side and Friedrich Merz, is that the U.S. is becoming more unreliable and NATO's future is uncertain. So Europe has to take charge of its own security. They're pragmatists and they know that. And the war in Ukraine is not just a war against Ukraine in their eyes. It's more of a threat to Europe as a whole. This also aligns a lot with what Emmanuel Macron says a lot.
Macron has been pushing for this kind of Europe to buy European made defense equipment rather than relying on U.S. weapons. He's visited Berlin. and spoke with Matz and he's reinforced that need for a coordinated European defense industry. So why Matz's move matters so much is that it could mark the start of a truly independent European defence strategy, given that Germany has so much capital locked in for defence, and it positions Europe as a much stronger global player.
And one thing that we talked about ahead of the German election on this podcast is that everybody in Brussels, with their eye on Berlin, was like, let's not talk too much about euro bonds because we don't want to put any pressure on Friedrich Merz. But now... that he has come out ahead in this election? Is the chancellor in waiting? Now we've seen this proposal for joint debt come out. Do you have a sense that Germany, the chief of the frugal countries, could get behind this?
It really depends. And I think this is going to give them a lot of flashbacks in the future about what the early 2010s looked like. Germany has obviously... never been a fan of taking in debt on a collective level. And I don't particularly see that anything is going to change in their moods. However, I'm not really sure if they have any other choice at this point, given that it was on the front line.
is making such a big effort to use the defense strategy as a reason to integrate Europe more in that regard. So I expect them to be more open to it in the future.
however like i said before nobody's gone on the record telling me this so we'll see what that has in store All right, well, that will give us another excuse to monitor one of our other favorite storylines, which is the relationship between Ursula von der Leyen and Friedrich Merz, who are German Christian Democratic allies, but not necessarily the best of friends.
we'll be staying tuned. Chris, thank you so much for joining us. Thank you too. And that's it for this week. Make sure you subscribe to EU Confidential on your favorite app. Rate us and send us a message at podcast at politico.eu. Thanks to Diana Sturris, our senior audio producer, and to Anne McAlvoy, Politico's head of audio. I'm Sarah Wheaton. See you next week.