German funding scandal brewing

Opposition CDU are looking to damage Schroeder with local funding scandal

BERLIN, Germany -- Ruling Social Democrats face a funding scandal in the run-up to September's general election.

The opposition Christian Democratic Union (CDU) is looking to take advantage of financial impropriety by the Social Democrats (SPD) in the Cologne local party.

But highlighting the SPD's problems could remind voters of the CDU's slush fund scandal which enveloped former Chancellor Helmut Kohl.

An official in the Cologne SPD office has resigned after admitting accepting 255,000 euros ($223,500) in improper campaign donations.

A local party treasurer has also resigned after admitting improperly handling declared cash donations between 1994 and 1998.

The resignations have not stopped CDU leader Angela Merkel attacking Schroeder over the weekend, Reuters news agency has reported.

Chancellor Gerhard Schroeder and other SPD leaders are playing down the scandal as a local issue which should have no bearing on the national polls.

"The Cologne story is a matter limited to Cologne," SPD Schroeder said. "Those responsible are gone or will be removed from the party. You can count on that."

But Merkel said: "Schroeder bears a share of the responsibility that a big corruption scandal is under way in his ranks.

"This is a matter for the entire national SPD. It must be cleared up immediately."

Highlighting slush funds could reignite memories of the scandal that tarnished Kohl's reputation in 1999 and overshadowed his successes in power which included the destruction of the Berlin Wall and the reunification of east and west Germany.

Kohl, who ruled the CDU for 25 years, admitted accepting $1 million in illegal donations while in office.

Despite paying a 300,000 mark ($135,000) fine to end a criminal fraud probe, he still faces a parliamentary investigation.

Edmund Stoiber, the Bavarian leader of the smaller sister party to the CDU, will face Schroeder in the September 22 election after Merkel decided he was better equipped to contest the contest for chancellorship contest.

German media reported over the weekend that SPD national deputies from Cologne and the surrounding region may become involved the affair -- potentially widening the scandal which broke this week.

Some conservatives are seeking to establish a national link by calling SPD General Secretary Franz Muentefering to testify before a parliamentary commission assessing party donations.

Muentefering, former head of the SPD in North-Rhine Westphalia which includes Cologne, has insisted he cannot be held responsible for the local party's finances.

But the CDU also risks dredging up its own local funding scandal if it pushes the issue.

Roland Koch, CDU premier in Hesse state, faced calls to resign two years ago after it emerged that his local party officials operated foreign slush funds.