Malta is one of few European democracies lacking any legislation regulating party financing, except for a Lm600 limit on campaign expenses by individual candidates. Yet despite having stricter laws on party financing, European countries are still plagued by inappropriate relations between businessmen and politicians.

Germany

Although Germany has one of Europe’s most generous systems of state funding for political parties, it still allows a degree of private funding for political parties. Although donations have to be declared by law, ex-Chancellor Helmut Kohl refuses to this day to name his party’s donors.

State Funding
Each party obtaining more than 0.5 per cent of the votes in an election is entitled to state funding. However, these public funds may not exceed 50 per cent of the party’s total income.
Parties receive EUR 0.85 per year up to the first 4 million votes and EUR 0.70 for each additional vote. Parties also receive EUR 0.38 in state financing for every EUR 1 they receive from other sources like membership fees and donations.
Since the mid-1990s, an upper limit of EUR 133m has been imposed on the total amount of public party funding; this equals an annual sum of EUR 1.66 – the price of cappuccino – per German citizen.
Angela Merkel’s grand coalition, which includes both main parties, is moving to raise the amount of money available for the party subsidy by Euro 20 million to Euro $153 million.
The state also provides parties with indirect support by allowing each tax paying donor to deduct donations to the parties of up to EUR 3,300 from their tax liabilities.

Private donations
Anonymous donations over EUR 500 and donations by public enterprises and political foundations are forbidden.
The source of donations exceeding EUR 10,000 must be exposed to the public. The splitting of large donations into parts below EUR 10,000 from the same holding is strictly forbidden. Foreign donations are also illegal. Donation of more than EUR 50,000 have to be declared to the President of the German parliament immediately.

Transparency
The party’s financial report has to be submitted before the end of every calendar year. Sanctions for reporting falsely include fines and prison terms. But these can be avoided if a wrong or incomplete report is corrected before the end of the second year.
In addition to these sanctions, errors in reporting leads to fines of three times the amount that was falsely disclosed or omitted.

Limits on expenditure
There are no limits on party or candidate expenditure established by law.

Major scandals
A major scandal emerged after an accidental tip off in 1998 by the former Federal cashier of the Christian Democratic Union who was trying to clear himself of a tax-evasion charge involving a EUR 500,000 transfer from a business source.
He claimed that he had passed the sum to the CDU even if this sum was never accounted for it in its report to the president to the German parliament.
Dr Helmut Kohl, who had lost his chancellorship in the 1998 elections, admitted that he had collected donations amounting to more than EUR 1 million over many years.
Kohl refused to disclose the sources of the donations received. He claimed that he had given his word of honour to the contributors not to disclose the names.
A parliamentary committee in charge of investigating the case ruled that this was highly unlikely and was used by Kohl as a pretext to hide business sources of the funds. None of this could be proven and, in line with the legislation on party funding, the legal case against Kohl was dropped.

France

In the wake of scandals involving all major political parties in the 1990s, France reacted by introducing strict limits on party expenditure and funding. But former President Jacques Chirac is still being hounded for his past misdeeds as Paris mayor where party employees where paid by public funds.

State Funding
Only parties which have presented candidates in at least 50 constituencies and obtained at least 1% of the votes cast in the previous general election are eligible for state funding. Part of the state allocation is shared between parties in proportion to the number of votes each received in the previous general election. A second part is shared between these parties in proportion to the number of elected representatives each has in the two parliamentary assemblies. A political party which has emerged since the previous general election is eligible for a lump sum contribution from the public purse, provided it has received, in a 12-month period, donations from at least 10,000 people totalling at least EUR 150,000. The State also reimburses a proportion of a party’s campaign expenses according to the percentage of the total votes cast it has obtained.

Private donations
Individual donations are capped at EUR 7,500. Donations to political parties enjoy the same tax rebate as subscriptions to political parties. Donations of more than EUR 150 must be made by cheque and a receipt must be issued. Since 1995, businesses are no longer allowed to fund political parties or contribute to the election campaigns of one or more candidates through direct or indirect donations.

Transparency
A National Campaign Accounts and Political Funding Commission was established in 1990. To obtain public funding, parties must keep accounts, get them audited by two auditors and submit them to CNCCFP for scrutiny.

Limits on expenditure
To level the playing field for candidates, a ceiling has been imposed on their spending. In European elections, the ceiling is EUR 1.15m per party. In the 2007 presidential election, it was set at EUR 15.5m and EUR 20.7m for the 2 candidates in the second round.

Major scandals
It has already been proved in court that, while former President Jacques Chirac was mayor, Paris town hall paid the salaries of officials who worked for his now defunct centre-right party, the Rassemblement Pour la République (RPR). Several former RPR leaders, including the former prime minister Alain Juppé, have already been convicted of stealing public funds by paying people who were not working for the city. Former president Jacques Chirac himself was interrogated for four hours in September by a judge investigating the alleged embezzlement of public money to fund his political career in the 1980s and 1990s.

Italy

Hit by major scandals involving illegal donations to political parties which already received generous state funding, 90 per cent of Italian voters voted to scrap state financing for political parties in a popular referendum in 1993. But Italian politicians found a way to re-introduce state funding as re-imbursements for costs incurred in electoral campaigns.

State Funding
Before the 1993 referendum all parties receiving more than two per cent of valid votes in general elections were entitled to state subsidy.
But in April 1993, 90.3 per cent of voters expressed their disapproval of public financing in a popular referendum As a result, state contributions to party finance were drastically reduced, and the need for private contributions increased. But in July 2002 the Italian Senate approved a provision granting political parties EUR 125m per year in 2002 and 2003, and EUR 153m in 2004, as reimbursement for electoral campaign expenses. All parties with over one per cent of votes are entitled to claim reimbursement.

Private donations
Before 1993, the law required the declaration of all private contributions exceeding EUR 516.45 but no limits were placed on the size of private contributions. The law was widely abused.
After the 1993 referendum a law was enacted to ensure that the sources of donations over EUR 5,000 are declared and that no single contribution to a party exceeds EUR 11,182. Contributions to each candidate must not exceed EUR 13,000. Companies that have securities listed on the Stock Exchange cannot make donations to parties.

Transparency
Parties were required to present an account of spending and sources of funds to the presidents of the two chambers of parliament which are, sent to the National Auditing Office where the documents were examined by three magistrates and specialised staff.

Limits on spending by candidates and parties
The amount each candidate may spend on a campaign must not exceed the sum of EUR 41,316 plus EUR 0.051 for any citizen inscribed in a single-seat constituency and €0,005 per each citizen inscribed in a multiple seat constituency. Campaign spending by parties is also limited to 10c per every inhabitant in a constituency.

Major scandals
In Italy the most important series of scandals were uncovered in the early 1990s and are remembered by the name “Tangentopoli” (Bribe city).
Emblematically, socialist leader Bettino Craxi, in a speech to the lower chamber on 3 July 1992, admitted involvement in the scandal but tried to play down the relevance of the offences, claiming that all parties and their representatives were guilty of having had recourse to irregular or illegal political funding. For Craxi, illicit activities were necessary if political parties were to flourish. If those activities were to be considered criminal activities, then the party system was indeed a criminal system. Indeed, Mani Pulite revealed that most politicians were systematically violating the law, but that public opinion was not prepared to buy Craxi’s excuses.
By entering the political fray without divesting himself of his media and commercial empire, former Italian Prime Minister and Forza Italia leader Silvio Berlusconi is often accused of an unhealthy mixture of business and political interests.
On the other hand left wing politician like Massimo D’Alema and Piero Fassino were recently accused of plotting to thwart a foreign takeover, this time of Banca Nazionale del Lavoro (BNL) by a Spanish bank, BBVA. They supposedly promoted the cause of an under-capitalised Italian insurance firm, Unipol, controlled by red co-operatives close to the Democratic Left Party.

United Kingdom

Before the 1990s the Labour Party was funded mainly by trade unions while the Conservative Party relied heavily on corporations. There was no secret about how much trade unions paid to the Labour Party as this was published in the party’s annual accounts since 1900. Nor was there really much secrecy about the Conservative Party. Since 1967 companies had been required in a tit for tat measure to disclose to shareholders all political donations over GBP 200 annually. All this changed in the 1990s when both parties began to target rich individuals as a source of money. As a reaction to allegations of sleaze that engulfed both parties, a law was passed in the 1990s to force political parties to declare their donors.

Limits on spending
A party is allowed to spend only GBP 30,000 for every seat it contests. So, if a party contests all 659 UK seats, the limit on its national campaign expenditure for the 365 days leading up to polling day would be GBP 19.77m.

Private donations
Parties must report all donations in excess of GBP 5,000 to the Electoral Commission on a quarterly basis, and on a weekly basis during elections. Under the terms of the law, parties are only allowed to accept donations in excess of GBP 200 from individuals appearing on the electoral register, companies, trade unions or similar organisations that are registered in the UK.
The provision of non-financial support to a party – such as subsidies or free materials – are counted as a donation.

State funding
Parties in the United Kingdom are not entitled to large-scale public funding, as in many other democracies. But various grants to political parties are payable from public funds. Parties are eligible for policy development grants to assist the party with the development of policies for inclusion in any manifesto. To be eligible a party must be represented by two MPs in the House of Commons. In 2007, GBP 2m were channelled to political parties for this purpose. Short money – that is funding to support Opposition parties – was introduced in 1975. In 2006 the Conservative Party received GBP 4.3m and the Liberal Democrats received GBP 1.6 m.

Major scandals
Shortly after Tony Blair was elected to government in 1997 it emerged that the Labour Party had received a donation of GBP 1m from Formula 1 racing boss, Bernie Ecclestone. After the election, it was revealed that the Labour Party was also negotiating to land another GBP 1m donation of from the same source, and that Mr Ecclestone had had a meeting with Mr Blair at 10 Downing Street. The meeting took place at a time that a ban on tobacco advertising in sport was being introduced and at a time when Formula 1 was contemplating a relocation from Britain to Malaysia because of the impending ban.
Coincidentally, shortly after the meeting the government announced an exemption for Formula 1 from the ban on tobacco advertisement. The immediate effect of the Formula 1 scandal was to persuade the government to move with alacrity to implement its manifesto commitment to clean up political funding. As a result, a law on party funding was passed in 2000.
In December 2006 Prime Minister Tony Blair and politicians of other parties were questioned by police as part of their investigation into the “Cash for Honours” affair. Police were investigating whether the law had been breached by parties taking loans from supporters in return for nominations to the House of Lords. But unlike donations, loans made on a commercial basis do not have to be made public as long as they were made on “commercial terms”.
The Government has since changed the law to require the declaration of all forms of loans.