EU passes new rules to prevent far-right funding abuses

The overhaul reduces the share of EU funding that is currently equally allocated to all European parties, and imposes new restrictions on how people can create a European party.

But the vexed issue of donations and loans remains broadly absent, as do tough sanctions - despite internal documents, seen by this website, that show how parties and foundations have gamed the system to their own advantage.

That 2017 document (drafted for the Bureau of the European Parliament, a body composed of the institution's top leadership) provides a 12-page insight into how some parties and foundations built up massive debts over the years.

Around €25m was doled out to some 14 parties in 2016 and a further €16m to their affiliated think tanks.

The biggest chunk went to the socialists with €7.1m, followed by the centre-right at €6.9m, liberals at €2.3m and greens with €1.7m.

15 percent rule

Parties until now were required to raise at least 15 percent of their own resources before being allowed access to EU grants, which then financed the remaining 85 percent of their budgets.

Some struggled, others took on loans, or accepted illegal anonymous donations, awarded dubious contracts to donors, contracted bogus studies, and used so-called 'contributions in kind' to meet the 15 percent EU finance threshold.

Such tactics led to some major scandals - largely exposed by journalists, given the internal preference by the European Parliament leadership under Martin Schulz to keep a lid on the abuse at the time.

Only earlier this year, the Institute for Direct Democracy in Europe (IDDE), a think tank linked to the Ukip-dominated Alliance for Direct Democracy in Europe political group, lost an appeal in the EU General Court of Justice, after having its EU grant suspended.

IDDE had put in place a system in order to receive donations in exchange for then awarding contracts for larger amounts to the donors. Among them was the Swedish Health Consumers powerhouse, which received a €20,000 contract from the IDDE after donating €12,000.

"We were asked to make this donation. Then we would later get a bigger amount. This advantage was the only reason for us to donate," Arne Bjornberg, president of the consumer group, was quoted in the media as saying in defence of the contribution.

Divi Cosmetics, a Belgian business, donated €12,000 to IDDE although its annual net profit was listed as just €98 in total. It turned out the brother of the company's owner made the contribution after receiving €20,000 from IDDE for his own firm.

The Bureau document seen by EUobserver also notes how one party and its affiliated foundation used charity boxes to collect small amounts of cash during internal meetings throughout 2016. Such anonymous donations are not allowed under EU rules.

The report also describes how the president of another foundation hired the services of his own company in a blatant conflict of interest. Another party organised four events in 2016 that led to the indirect financing of national parties, which is illegal.

Contributions 'in kind'?

It also shows how some parties rely on contributions in kind to shore up their own resources - which are legal, but often difficult to audit, given that their true value is almost impossible to assess.

The EPP, for instance, registered zero 'in kind' contributions in 2016 - although its think thank, the Wilfred Martens Centre, noted €120,000 in its provisional budget.

The socialist provisional budget registered €75,000, liberals €100,000, greens €60,000 and the conservatives €100,000. Those figures may be higher or lower after the budget has been executed, however.

The German centre-right MEP Rainer Wieland last summer - during a constitutional affairs committee debate ahead of the reforms - admitted that "all parties currently have problems of finding sufficient contributions."

Yet the vice-chair of the same committee, tasked to probe the party funding reforms led by Wieland, is Morten Messerschmidt, a Danish MEP whose political party and foundation were required to reimburse the EU parliament some €400,000.

Messerschmidt denied he cheated the system, but resigned as chair of the Danish People's Party delegation in the European Parliament over the affair.

He belongs to European Conservative and Reformists group and worked as a shadow rapporteur on the very same EU funding reforms voted through on Tuesday.

To help end these types of accounting scams, the EU decided to make it easier to get access to the actual funding. It dropped the 15 percent threshold of 'own resources' for political parties to 10 percent, and to 5 percent for foundations.

It also decided to distribute 90 percent of the EU grant in proportion to each party's share of elected MEPs - putting small parties at an immediate disadvantage.

For some, even the 10 percent threshold is too much.

Didier Klethi, the director general of DG finance at the European Parliament, had floated a zero percent idea. But Klethi's plan aimed to squeeze out small parties, typically made up of far right nationalists.

Founding new parties

New rules on how to set up European parties were also needed.

Among those affected is the European Free Alliance (EFA), a small party aligned with the Greens to form one of eight groups in the parliament.

In an emailed statement, EFA director Gunther Dauwen warned his party stands to lose five percent of its overall budget to bigger counterparts.

The reforms also appear rushed, with one EU parliament source saying that the backroom negotiations with the EU states, also known as triologues, only took 45 minutes.

Those reforms were spearheaded by Wieland and centre-left Italian MEP Mercedes Bresso and then formally proposed by the European Commission in September.

Last summer, Wieland also told MEPs that everything should be done to ensure that new rules apply by 2019, when the next European Parliament elections take place.

Phantom parties

Ulrike Lunacek, an Austrian Green MEP at the time (she later resigned over the poor performance by her party in Austria's domestic elections), made similar statements following revelations that people had managed to create phantom political parties by using 'crossparty' memberships to attract EU funds.

Most were launched by far-right politicians bent on destroying or undermining the EU. 'Crossparty' meant MEPs and members of one national party or even members of regional parties could be affiliated with two different European political parties.

Such moves counted towards the registration criterion needed to obtain EU funds - but pose questions on its political legitimacy in terms of public representation.

The criteria includes, among other things, having representatives from at least seven EU states.

European Commission vice-president Frans Timmermans told reporters last September when presenting the reforms that there were cases where just one individual had sponsored more than one party.

He also cited other cases where members of the same national party sponsored different European parties. "This helps create multiple European parties that actually represent the same group of underlying citizens," he warned.

Far-right abuse

Examples abound among the far-right nationalist parties.

The Alliance of European National Movements (AENM) was originally set up, among others, by Bruno Gollnisch of France's National Front.

Although the National Front is no longer associated with them officially, the AENM still managed to meet the seven-country threshold thanks to a regional councillor from the Front National.

AENM was therefore eligible for up to €420,000 in 2017.

Marguerite Lussaud, also of the National Front, was affiliated to the Alliance for Peace and Freedom (APF).

"If Lussaud would not have supported the party, the APF would not have reached the threshold of seven member states necessary to obtain EU funding," according to Wouter Wolfs, a researcher at KU Leuven, a Belgian university.

The Alliance of Peace and Freedom, which includes people from Germany's hard-right NPD party, reached a seven country threshold thanks to a National Front regional councillor from Brittany in France, who claimed to have no knowledge of signing anything for them when contacted by journalists.

It too was also eligible for up to €420,000 in 2017. In late March, it added Jean-Marie Le Pen, the former National Front leader and a convicted racist who once described the Holocaust as a "detail" of history, as a member.

The Coalition Pour la Vie et la Famille (Coalition for Life and Family), linked to the ultra-Catholic group Civitas in France, reached its seven country threshold thanks to a regional councillor from Greece who previously belonged to the neo-nazi Golden Dawn party. It was therefore eligible for €300,000.

Others include Beatrix von Storch from the far-right AfD in Germany who was affiliated with the Alliance for Direct Democracy in Europe (ADDE), while Marcus Pretzell, also from the AfD, was aligned with the Movement for a Europe of Nations and Freedom.

To prevent this abuse, the new rules voted in on Tuesday will only allow parties and not individuals to create a European party. While individuals can still be members of a European party, they won't be counted as part of its registration eligibility.

Original plans, first floated by EU parliament secretary general Klaus Welle in 2016, had also included requiring seven or even up to 22 MEPs to form a European political party. That idea was scrapped following pressure from the Greens.

This article was updated on 19 April 2018 at 9.35 am to reflect that Messerschmidt had resigned from his post. The original article said he had been fired. It also said Messerschmidt had to repay €400,000, when in fact it was his political party and affiliated foundation that had to return the sum.