Financing of Political Parties

Where do political parties get money? This section focuses on the issues related to the way political parties in Europe raise revenue. We can classify the main sources of party financing in two categories - public and private - and both bring a number of important challenges. Contributions in this section describe, analyze and quantify these issues. The regulatory framework of party financing has been a turbulent area in the recent years in many European countries, with new specialized offices being set up, limits on campaign contributions and spending introduced, and new reporting standards implemented. What were the motivations of countries to adopt new rules and what were the effects of these changes? What are the implications for party funding at the European level? Regarding the financing of political parties from public sources, what are the drawbacks and benefits with respect to private funding? For example, in light of the rise of new populist parties, how big are the dangers of opportunism when parties are heavily funded by the public sector? What are the effects of some of the more innovative ways to publicly fund parties, such as the option to assign a small part of one’s personal income tax to a specific political party, as seen for example in Lithuania? A changing structure of party funding throughout Europe in recent years provides a number of opportunities for interesting research designs. An important part of this section focuses on the political connections established through private donations to parties. A growing body of literature shows that connections between businessmen and politicians may be exploited to add value to the connected firms. Why do corporations donate money to parties? And, importantly, should they be allowed to do so? What do they get in return? For example, do connected firms perform better in public procurement auctions, national or European grants competitions, or as measured by their stock returns or financial performance in general? Recent improvements in the availability and quality of data on both the corporate connections to politics and firm performance promise important advances in the understanding of the role of connections between business and politics.