In 1959, West Germany became one of the first nations to adopt a system of partial public financing of its political parties. As with any public policy experiment, public funding has been altered over the years with the intention of adjusting to the needs of the larger political system. As Karl-Heinz Nassmacher notes in his chapter in this volume, the German public financing system, like those of several other countries, has thus far undergone three developmental stages: a stage of early experimentation; a second period in which legislators, more sure of the approach, enlarged the scope of the system; and currently, a stage of adjustments to keep the system in line with the rate of inflation.

In 1959, an annual allowance of five million Deutschmarks was given to political parties for their political education activities. By 1966, the parties received a boost in public payments to DM 38 million for the purpose of carrying out their responsibilities under the Basic Law. In 1966, however, the public financing system came under challenge, and the program in operation was declared unconstitutional by the Constitutional Court. In 1967, a revised form of public funding emerged which involved moderate tax benefits for donations to political parties, substantial flat grants by the federation and all states for election expenses, and an annual allowance to political foundations for political activities. In 1979, public subsidies were extended to include a flat grant for election expenses relating to the European Parliament.