March
2008

REPORT - PARTY FINANCING

Party financing under new scrutiny

Will a new watchdog to monitor the donations to political parties be all bark and no bite? asks Ana-Maria Nitoi

No democracy has a system where the financing of political parties is one hundred per cent transparent and Romania is no different.
The country’s flexible system of laws and the lack of effort in bringing corrupt individuals to justice has allowed anyone to finance parties with little scrutiny.
But there is new legislation in place that attempts to improve transparency. In the local elections this May, the elections will be organised by the Permanent Electoral Authority (AEP), an independent institution controlled by Parliament. AEP is also responsible for regulating Romanian political parties’ incomes and expenditures.
But don’t expect the exposure of huge scandals.
“This election year I don’t believe the AEP will be able to ensure an efficient supervision over the financial activity of the parties,” political analyst Cristian Parvulescu from NGO Asociatia Pro Democratia (APD) tells The Diplomat. “This is because the people working for this institution don’t have the necessary investigatory experience and will rely on information given by the parties.”
Laws regulating the financing of parties change every couple of years, under pressure from pro-transparency NGOs like the Institute for Public Policies (IPP) and APD.
“In the near future things will start moving on the right track,” says IPP deputy director Adrian Moraru. “The politicians will only have to not insult our intelligence by not being so obvious when they handle black money.”
'1') { require('php/art_auth.inc'); } ?> Parties in Romania benefit from funds from the budget, membership fees of party members and donations. The state subsidies in Romania are divided between parliamentary parties according to the percentages they obtain in parliamentary elections and a smaller amount from those obtained in local elections.
Donations remain the Romanian parties’ main source of income and donors find elaborate methods of disguising their origins.
Before the 2006 modifications to the financing laws, Romanian parties could receive donations in kind which the party did not need to declare.
When a party organises a regular gathering or congress, it usually does not pay for the accommodation, dinners, lunches or transportation. Rich donors will ‘sponsor’ the event for his pet party in return for political favours once the group is elected.
Most of this money comes from businessmen who do not want to be connected directly to a political movement and prefer to make ‘anonymous’ donations. The party prefers this situation because its financial influences are not subject to disclosure.
In the 2004 elections political advertising on television, which is now banned, benefited parties with a special relationship with some TV stations. These broadcasted commercials, worth 100,000s Euro, for free. Legally, the parties did not have to declare these donations to the state because they were “gifts” from the networks.
The new law states that donations such as giving accommodation to party members, transport, free adverts, staff, computers, land, cars or propaganda materials must be declared to the new regulators.
To help campaign financing, another practice is for a sympathiser to a party to pay for their advertisements in newspapers during the campaign. This is a form of donation in kind.
The Diplomat asked three quality national dailies, which carried political advertising in their newspapers before the European elections last November, who paid for the commercials. Evenimentul Zilei, Cotidianul and Jurnalul National, papers which support the principle of transparency, chose to give no response.
Having friends in leading positions on national dailies is a way for parties to receive fat discounts for electoral campaign adverts. In the last local elections in 2004 discounts were not considered a way of financing a political party or a candidate.
“Mona Nicolici, the Conservative Party (then called the PUR) candidate for Bucharest’s Sector One, managed to receive such discounts worth 10,000 Euros from the TV advertising broadcasted on the TV stations owned by the President of the Conservative Party, Dan Voiculescu,” alleges Parvulescu.
Donors also use the loopholes in the current laws to fund parties. IPP alleges that Grivco, a company owned by then president of the Conservative Party (PC) Dan Voiculescu, made donations to PC, even though the firm had huge debts to the state, which is an illegal practice.
But thanks to the Romanian legal system, Grivco managed to prove that for only 48 hours during an entire year the company had no debts to the state. It was during this window that the company made the donation.
Small parties like the Greater Romania Party gains its income from state subsidies, while large parties like the Social Democratic Party (PSD), which has around 800,000 members nationwide, is financed by membership fees.
However having such a base allows some parties to declare that mysterious packages of money are ‘membership fees’, thus covering up for the provenance of the cash.
The AEP has the power to fine parties that break the law on finance. An extreme measure, which the AEP can recommend, is to confiscate money that has journeyed through an illegal route to the party’s budget.

USA versus Europe

In democracies, there are two international trends for financing political parties. The American way gives no limits on financing, but the donations and expenditures are made public.
The USA is a unique case because it is a big nation, a wide territory, with large interests and the amounts of money necessary for campaigns are huge. The country has no state subsidies and the party does not finance candidates for presidential elections.
Candidates must appeal to donors for campaigns to finance media coverage and campaign staff expenditures, which means each contender must court the richest companies and wealthiest individuals.
The European trend is more conservative, with each country setting up an institution to regulate financing. In most European countries donations are capped and the parties receive state subsidies.
Germany does not give subsidies to parties according to the percentages obtained in elections, but awards an amount of money for each vote, with the historical slogan declaring ‘One Deutschmark, one vote’. This way, politicians work harder for votes to win the money from the state budget.
The UK also lacks transparency in campaign financing and the Brown Government and Conservative opposition have both been rocked by financing scandals in the last year. But, Guy Burrow, executive director at lobbyists Candole Partners says there is a difference between the UK and Romania.
“In Great Britain when a politician is suspected of having committed something wrong, he immediately resigns if he holds a public position,” he says, “meanwhile, in Romania, such politicians don’t have the dignity to resign, they are not pursued, judged or punished.”


Source : http://www.thediplomat.ro/reports_0308_2.php