Analysis-China spy charges up scrutiny of Germany's far-right ahead of EU polls

By Sarah Marsh and Matthias Williams

BERLIN (Reuters) - Leaked discussions about a mass deportation plan. A trial for using Nazi language. And now China spying allegations and reports about covert payments from a Kremlin ally.

The far-right Alternative for Germany (AfD) party is facing unprecedented scrutiny this year and fighting to put out multiple fires that are denting its support ahead of European and local elections that threaten to upend German politics.

The latest allegation was that Jian Guo, a staffer working for the AfD's top EU election candidate Maximilian Krah, was passing information to the Chinese secret service.

Police arrested Guo a week after media reports that the FBI had also questioned Krah when he travelled to the United States about suspected payments from a pro-Russian activist.

Krah has denied receiving cash from the activist and expressed surprise about Guo's arrest, while the AfD has said it would cooperate with the investigation.

"The campaign will now be terribly overshadowed of course by this affair," Krah said on Wednesday, after emergency talks with the AfD heads in Berlin. "Now we are unfortunately talking about China rather than Europe."

Krah said he would no longer appear at the campaign opening event on Saturday, but would remain lead candidate.

The AfD leadership may struggle, however, to distance itself from growing scandal.

"This is not just a problem of Mr. Krah, it is also a problem for the party leadership," said Nicolaus Fest, former leader of the AfD's European Parliament delegation.

Fest and a second official, a high ranking AfD lawmaker who spoke on condition of anonymity, said the delegation had repeatedly warned the leadership about Krah's connections, even sending a letter in 2022 expressing concern about his behaviour.

The AfD in a statement on Wednesday said "any influence by foreign states through espionage, but also attempts to buy opinions and positions, must be investigated and firmly prevented".

NO LONGER UNDER RADAR

The affair could further sap support for the AfD, whose popularity has dipped to 16-18% in nationwide polls from a record of 23% last December, after mass street protests against its rise and the creation of a new left-wing populist party sucking away part of its vote base.

Political analysts and pollsters said the latest reports were likely to put off voters who might have cast their ballot for the AfD simply out of protest. But the extent of the damage would depend on how the nationalist party dealt with them.

The party has proven resilient at bouncing back from scandals in the past, as many of its supporters believe the narrative that it is the victim of establishment parties, media and institutions.

"Any form of espionage contradicts the idea of a party that wants to put national interests in the foreground," said Stefan Marschall, political scientist at the University of Duesseldorf.

"But if the AfD manages to disqualify these accusations then it could also win solidarity from its backers."

The AfD was founded as an anti-euro party in 2013 during the euro zone crisis but has shifted rightwards since then and is now under state surveillance for right-wing extremism.

Mainstream German politicians and media have in the past given little attention to the AfD, on the grounds that doing so would lend it legitimacy and publicity.

But ignoring the AfD has become untenable since it soared to second place in polls last year as squabbling within the ruling coalition about the challenges facing the economy unsettled citizens already dealing with a cost-of-living crisis.

The party remains on track to come in first place in three eastern states holding elections in September.

More imminent are the European Parliament elections in June, where the AfD is expected to contribute to a surge in support for the far-right across the bloc.

NEW SPOTLIGHT ON FOREIGN POLICY

The latest allegations have put new scrutiny in particular on the AfD's foreign policy positions, such as its call for an end to sanctions on Russia and the affinity of some lawmakers with authoritarian states.

The high-ranking AfD lawmaker who requested anonymity complained key positions in the party were increasingly held by people with pro-Russia and pro-China views.

On Tuesday, Krah abstained in a vote banning the sale of goods in EU made from forced labour, seen as targeting China.

In an interview in 2022 with the Global Times, a tabloid published by the ruling Communist Party's official People's Daily, he said "fighting America's wars is not in our interests and not in the interests of the Ukrainians".

In 2021, he had posted a photo of himself and the second candidate on the AfD's list for the European Parliament elections, Petr Bystron, paying a "solidarity visit" to pro-Russian Ukrainian politician Viktor Medvedchuk, then under house arrest in Ukraine.

German magazine Der Spiegel and Czech newspaper Denik N earlier this month reported that Bystron had received money from the pro-Russian portal Voice of Europe. Bystron has strongly denied the report.

"If the impression solidifies that the AfD is buddies with the authoritarian, dictatorial regimes in Russia and China, then these allegations will hurt it," said Hermann Binkert, head of the pollster INSA.

(Reporting by Sarah Marsh in Berlin and Matthias Williams in London; Additional Reporting by Thomas Escritt and Holger Hansen in Berlin and Phil Blenksinop in Brussels; Editing by Alex Richardson)