Funding row hits German right

The man thought most likely to challenge Gerhard Schröder for the German chancellorship suffered a blow to his chances yesterday when his party was caught up in a funding row.

Edmund Stoiber, head of the arch-conservative Christian Social Union was under pressure to explain £2m which the news magazine Stern claimed the CSU had improperly obtained from the federal authorities by incorrectly classifying its income.

The party's secretary general, Thomas Goppel, described the allegations as false, but the issue was pounced on by the government party, the Social Democrats, who see Mr Stoiber as a more dangerous electoral rival than Angela Merkel, leader of the CSU's bigger sister movement, the Christian Democrat Union.

A decision on who should lead the right wing into September's general election is expected this month. Mr Stoiber had been widely tipped for the job.

"If what is suggested is true, Stoiber is in the middle of a new campaign contributions scandal," Franz Müntefering, the Social Democrats' general secretary, said. "Before he carries on working to outrun Ms Merkel, he must first answer some questions."

Yesterday's report in Stern was a bitter surprise to the entire Christian Democrat movement, which was severely damaged by a previous funding scandal involving the CDU its former leader, the ex-chancellor Helmut Kohl.

Only last month opinion polls suggested that the Christian Democrats had overtaken the Social Democrats, and that they could win the election under Mr Stoiber's leadership.

Stern said that in its financial returns for 1994 - 1999 the CSU had classified as donations £4m in subscription income from two party publications, including its newspaper Bayernkurier.

Under German law the federal authorities add 50% to all the money parties raise in donations. Thus the CSU stands accused of taking £2m to which it was not entitled.

Mr Stoiber was elected head of the CSU in 1999.

Mr Goppel said in a statement that the allegations were absurd.

He said the party had clearly listed the funds in question as "contribution subscriptions" in its annual reports to the federal authorities, and they had not raised any objections.