There are a number of ways in which political parties and candidates can raise money. The traditional paths would be through donations – corporate or individual – and public funding. In Germany, the federal government spends around 130 million euros (around USD $150 million) every year on political parties. For most national-level parties, this makes up around one-third of their income. According to political finance laws, parties rely on public funding to pad a significant portion of their budgets. Germany’s AfD party (short for “Alternative fuer Deutschland” — “Alternative for Germany”) found a novel way to make this system work for them. Established in 2013, it narrowly missed the 5 percent hurdle and thus did not make it into the German Parliament (Bundestag), but got elected in the 2014 European Parliament elections while campaigning on an anti-euro ticket.
While its national bid has been unsuccessful so far, its fundraising has been anything but: The party sells gold bars and gold coins to its members on an online platform, and makes lots of money this way. 1.6 million euros have been raised so far. In addition, the party leadership is hoping that these efforts might make the party eligible for more public funding. This is possible because of a twist in German public party finance regulations. Parties are eligible for public funding, the amount of which is calculated on the basis of the parties’ importance. This, in turn, is measured by the amount of votes they received: Funding is available for parties who have won over 0.5 percent of votes during the previous European or federal election, or over 1 percent in the previous state election. But it also depends on how much money the party itself manages to raise. Roughly speaking, the amount of public funding cannot exceed the amount of money the party manages to raise through members’ fees and donations. And this is where the gold comes in. The AfD is a relatively new party with – compared to the mainstream parties such as the Christian Democrats (CDU) or the Social Democrats (SPD) – a small member base and comparatively less donor contributions. To make up for this, the selling of gold is meant to bring revenue into the party’s coffers, revenue that would then be used to increase the amount of public funding they would be eligible for.
The AfD’s fundraising technique has raised eyebrows in Berlin, but has been found to be within party finance regulations. If anything, it shows the limits of good faith intentions and the unreasonable reliance on them in Germany’s political finance system. It is symptomatic of a more deeply-rooted problem: a system of slow transparency, non-existence of caps of donations and no upper limits for campaign spending. A few aspects of the political party funding systems are particularly worrying:
- Only donations exceeding 10,000 euros (USD $11,600) must be published in a party’s annual account. As these annual accounts are only published months after the end of the financial year, the time gap between the donation being made and it being published can be up to 16 months, making it virtually impossible for the public to track how a donation relates to a political cause in a timely manner.
- Only donations exceeding 50,000 euros (USD $58,000) are published within days of the donation being made. There have been reports of donors splitting donations to stay under this threshold, or spreading large donations over a number of donors to get around publishing guidelines.
- There is no limit or cap on the amount of contributions that can be made by any one person or company. Recent developments in the U.S. have shown the problem with this, as political finance and campaign spending spirals – arguably – out of control.
There is also a neat way to get around the already low hurdle of party finance transparency altogether through so-called “sponsoring” of a political party’s activities. In Germany, this happens, for example, at party conventions, where companies can buy exhibition space and the opportunity to talk to (read: lobby) party members. This is, in itself, not a problematic arrangement. What is problematic is that the sponsoring agreements between parties and corporates are not required to be published. There is now increasing pressure on parties to voluntarily publish this information and some parties are starting to proactively list the revenue from these arrangements (e.g. the Green Party). However, there is an urgent need for the legislative to make this a legal requirement.
The sponsoring nonregulation touches upon a broader question, which a lot of countries struggle with: The legislature that is generally in charge of regulating political party finance is made up of political parties, which will generally not be tempted to act against their own interests.
In the case of Germany, one may argue that the lack of caps on donations has not led to major problems as of yet. Unlike the U.S. and other countries, there have been no major campaign finance scandals in the last years. Constructs to channel additional money into politics, such as PACs and super PACs, are completely unknown in Germany. In general, donations by companies and individuals are nowhere near the amounts that we are seeing in the U.S. In the same vein, campaign spending is generally quite low, although figures for each party – let alone each candidate – are hard to come by. But estimates suggest that in the last parliamentary election year, 2013, the SPD spent 23 million euros (USD $30 million), the CDU spent 20 million euros (USD $26 million) and the Green Party spent 5.5 million euros (USD $7.5 million) for advertising agencies. When compared with the estimated USD $6.3 billion from the 2012 U.S. elections, this is not a lot. Expressed differently, the major parties in Germany spent USD $0.80 per German resident, while in the U.S. this number was USD $19.93.
Whereas the amounts spent may not be that high (yet), it is important to keep in mind that we are talking about millions of taxpayers’ money that is spent on political parties. While parties very clearly fulfill an important function in the political system and political education, this should not come with a carte blanche. Transparency and timely disclosure should be what the citizens can expect in exchange for this funding.
If nothing else, uncertainty around party finance fosters mistrust in political parties at a time when distrust of political parties is on the rise virtually everywhere, Germany included. Moreover, it should not be hard to put in place stricter provisions if not many in practice — as is often argued — would be hurt by new regulations. So, why not fix the disclosure loopholes now and aspire to become not a gold dealer but a gold standard?
Interested in writing a guest blog for Sunlight? Email us at email@example.com