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Thursday, 7 March, 2002, 18:45 GMT
Raid on SPD over funding scam
Chancellor Schroeder and his Green Foreign Minister Joschka Fischer
The affair could have embarrassing implications for Berlin
Police and public prosecutors in the German city of Cologne have raided the local offices of Chancellor Gerhard Schroeder's Social Democrats (SPD) in an escalating funding scandal.

They took away boxes of documents as part of their investigation into what happened to millions of euros which passed through the party's hands.

The increasingly murky details emerging about the bribes and tax scam could prove seriously damaging to the party as it prepares to fight elections in September.

Two years ago the opposition Christian Democrats (CDU) were brought to their knees over their own long-running funding scam.

Donations divided

The head of the Cologne branch of the SPD, Norbert Ruether, has already resigned after acknowledging that he improperly accepted donations worth hundreds of thousands of euros.

Helmut Kohl
Kohl was seriously damaged by his funding scandal
But now it has emerged that sums of up to 15m euros are involved. The money was diverted into Swiss bank accounts.

Around 500,000 euros ($450,000) of that money found its way back to Cologne.

Mr Ruether received the money in small sums to avoid the scrutiny of auditors and local party supporters were then given tax exemption receipts for the "donations".

But the bulk of the Swiss millions remains unaccounted for.

Some of the cash is thought to be bribes paid in connection with a vast contract to build a waste incineration plant for the region.

National implications

So far the crisis has been confined to Cologne, and party officials insist that federal SPD leaders knew nothing of the affair before last weekend.

Chancellor Gerhard Schroeder has said he wants the issue cleared up as quickly as possible, and has sent auditors to Cologne to examine the books.

But as the extent of the scandal becomes clear, Mr Schroeder's chances of coming out of the affair untainted seem slim.

One of his close allies, Franz Muenterfering, headed the local party for a time and is expected to be dragged before a parliamentary investigation committee.

Mr Schroeder faces a tough election battle later this year against the conservative candidate Edmund Stoiber.

CDU officials in Cologne have already indicated that they will not treat the funding scam as a purely local issue.

But correspondents say it is as yet unclear how much political mileage the conservative opposition can gain from its opponent's mishap.

That would risk reminding voters of their own previous troubles.

The financing scandal blighted the reputation of one of Western Europe's longest-serving post-war leaders, Helmut Kohl.

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The BBC's Rob Broomby
"The police have established a special commission to deal with the case"
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