GERMANY was plunged into a political scandal yesterday when top companies admitted that they have been topping up the salaries of hundreds of local and national politicians.

The latest case, exposed by the mass circulation Bild newspaper, could seriously damage Angela Merkel, the Christian Democrat leader, who is the main Conservative challenger to Gerhard Schröder, the Chancellor.

Her closest political ally, Hildegard Müller, the Christian Democratic Deputy, admitted that she has been taking €2,000 (£1,400) a month from the Dresdner Bank.

Last month Frau Merkel lost another close aide — Laurenz Meyer, secretary-general of the party — who admitted receiving big pay-offs, subsidised electricity bills and soft loans from his previous employer, the energy group RWE. Herr Meyer resigned and has promised to pay the controversial sum — about €80,000 — to charity. But he was given a €50,000 redundancy payment from his party and looks set for a comeback.

The rapidly spreading scandal takes in all parties, not just the conservatives, and many of Germany’s leading companies. “The system has developed an extraordinary vulnerability to corruption, influence-peddling, cronyism and the violation of democratic principles,” Hans Herbert von Arnim, a leading German expert on political financing, said.

BASF, the chemicals group, alone has 235 employees who are in fact full-time politicians at local and national level. The company’s internal ruling is that staff who go into politics can return to the company if they lose office. In the meantime, their political salaries are topped up to bring them into line with what they would have been earning had they stayed as full-time executives.

Volkswagen, according to an internal document leaked yesterday, continues to pay salaries to executives who switch to politics. Thomas Mickeleit, a VW spokesman, confirmed yesterday that this has been the practice since 1990, but, he said, the politicians are paid only if they actively contribute to the company’s well-being.

VW beneficiaries are mainly Social Democrats with their power base in Lower Saxony, which is where the car company’s headquarters is based. The company has promised to release the names of the politicians on its payroll by the end of this month; about 100 names are expected to be on the list.

Bertelsmann, the media group, has been paying a full salary for the past 13 years to the European Union parliamentarian Elmar Brok, a Christian Democrat. The group says that it never made a secret of the payments. “Right from the start, Elmar Brok has made his Bertelsmann income public,” a spokesman said. “He observes international legal and political developments for us and advises the group with a view to possible investments.”

Members of the German Parliament have a duty to declare their sources of external income over and above €18,000 a year. Plainly, not everybody does so and there is a great deal of fudging.

The critical question is what companies are getting in return for their money. There has been a dense intertwining of politics and business in Germany for decades, but that has become increasingly unacceptable to the German public.

One of the first and loudest critics of the system yesterday was Edmund Stoiber, the Prime Minister of Bavaria, yet a quick look at his perfectly legal earnings demonstrates why ordinary Germans are growing impatient. Herr Stoiber gets a salary of €165,317 as Prime Minister of Bavaria (taxable), a salary of about €32,100 for being a member of the state parliament (also taxable) and about €74,000 in non-taxable expenses. Indeed, many politicians benefit in this way from multiple salaries.

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