Dieselgate: how much did Merkel’s government know? by Geoffrey Smith @FortuneMagazine September 24, 2015, 6:27 AM EDT E-mail Tweet Facebook Linkedin Share icons There was no way that this scandal wasn’t going to get political. The German government knew that the diesel engines sold by the country’s biggest carmakers weren’t as clean as they claimed as long ago as last year, according to the public broadcaster ARD. ARD said the European Commission had already flagged the issue to Berlin in a warning letter in the fall of 2014, saying that the actual level of emissions from even the newest, supposedly cleanest diesel engines were far higher than those claimed under lab testing conditions, and also far higher than the legal maximum. The claim exposes the internal contradictions of Europe’s policy on reducing harmful greenhouse gases. For years it has given preferential status to diesel engines because they emit less carbon dioxide, the greenhouse gas that grabs most of the headlines. But that has overshadowed the far higher levels of nitrogen oxides and fine soot particulates emitted by diesel. These are a more immediate threat to human health, campaigners say. News that VW had doctored its test results in the U.S. led to the resignation Wednesday of CEO Martin Winterkorn, although he claimed that he didn’t know about the manipulations. “The substantial deviations are all the more serious, because the fast and broad market penetration of Euro-6 diesel cars has been seen for the last 10 years as an indispensable measure,” for getting overall emissions levels down, the Commission’s letter said. “Euro-6” is a standard that sets maximum emission levels of nitrogen oxides at 80 micrograms per kilometer. As of Sept. 1, all diesel vehicles sold in the E.U. must conform to it. The exchange appears to have started in June, over a year before the U.S. Environmental Protection Agency came down on Volkswagen AG VLKPY for doctoring its test results. However, Transport Minister Alexander Dobrindt said Wednesday he had only found out about the affair “over the weekend from the newspapers, like everyone else.” For environmental campaigners, the news is proof of how government has been captured by the car industry, which accounts (directly and indirectly) for around one in every seven German jobs. “For 10 years, the maximum limits for nitrogen dioxide, the diesel exhaust gas that is particularly harmful to human health, have been massively exceeded in German cities, the environmentalist NGO Deutsche Umwelthilfe (DUH) said in a statement. “Yet even today, no adequately effective measures have been taken, due to pressure from the auto industry.” However, senior government figures are trying hard to isolate the problem, fearful that the affair could have devastating effects on German industry’s global reputation for technological excellence. “We must make sure not to make a discussion over the whole of German business out of this,” Economy Minister and vice-Chancellor Sigmar Gabriel said Wednesday. “This is a case specifically tied to engine software at one auto company.” Handelsblatt reported earlier this week that the software in question was supplied by Robert Bosch & Co., who said it left the programming to the buyer. Other reports suggest the technology has been on the market since 2005. Stefan Weil, the governor of the northern German state of Lower Saxony where VW is based (and a party colleague of Gabriel), admitted a high probability of criminal liability on German television last night and promised a “merciless” clean-up, but there is already widespread skepticism in the German media about the political and business establishment’s ability to investigate itself properly. The Frankfurter Allgemeine Zeitung, Germany’s newspaper of record and staunchly loyal to Merkel’s center-right Christian Democrats, asked in an editorial Thursday why it was always the U.S. justice system, rather than the German one, that has managed to uncover wrongdoing by companies such as Siemens AG (bribery and corruption), Deutsche Bank AG (market-rigging, mis-selling), and now, it seems, the car industry, the holiest of German business holies. “The truth is that the idea of consumer protection comes from America. It’s taken more seriously over there than it is here,” FAZ‘s Holger Stetzner wrote.