Edmund Stoiber, the conservative candidate tipped to win Germany's general elections in September, has denied that his party received substantial, illegal donations from an exiled arms lobbyist before a parliamentary commission.

The alleged donations to the CSU named by Schreiber never took place

Edmund Stoiber

Mr Stoiber was probed on accusations levelled by businessman Karl-Heinz Schreiber, who alleges that, during the 1980s, he donated 2m Deutschmarks (1.02m euros) to the Bavarian conservative party (CSU) that Mr Stoiber leads.

Mr Schreiber, a key figure in the funding scandal that disgraced former chancellor Helmut Kohl, claims that Mr Stoiber was aware of the donations but, instead of declaring them, kept quiet.

Mr Stoiber dismissed the allegations, and suggested that electioneering by the Social Democrats, lagging behind the conservative CDU/CSU alliance in the polls, was behind the current probe.

"The alleged donations to the CSU named by Schreiber never took place," he told the committee. "The reality is that you have invited me here because I am the CDU/CSU's candidate for chancellor."

Mr Schreiber, who is currently under arrest in Canada on fraud charges, is fighting his extradition back to Germany.

Glowing reputation

The commission investigating Mr Stoiber is same which uncovered the slush funds of Mr Kohl - who has admitted taking more than 1m euros in secret party donations.

The BBC's Steve Rosenberg in Berlin says any hint of another financial scandal to refresh voters' memories is good news for Social Democrat Chancellor Gerhard Schroeder.

The SPD has failed to meet an election pledge on unemployment

All major surveys carried out in the past month have put the CDU/CSU alliance at least five percentage points ahead of Mr Schroeder's SPD, which has failed to meet an election pledge to bring unemployment below the 3.5m mark.

Mr Stoiber has mercilessly hammered this home, and pointed to his own successes as prime minister in the southern state of Bavaria, which has enjoyed a mini-boom at a time when the rest of Germany has suffered recession.

Our correspondent says that he has earned himself a reputation as one of Germany's successful politicians, but that this standing could be seriously tarnished if these allegations of illegal funding stick.