In a fresh twist to Germany's political funding crisis, it has emerged that taxpayers' money was secretly used to support foreign political allies in the 1970s.

Former SPD Chancellor Helmut Schmidt has revealed that, between 1974 and 1982, up to $20m was channelled through German parties to their counterparts in Spain and Portugal.

The disclosures come at a time when Germans are still reeling from the Christian Democrat financing scandal and the revelations that former Chancellor Helmut Kohl ran a series of secret accounts containing undeclared party contributions.

But the payments set up during Mr Schmidt's administration are said to have been intended to bolster democracy in Spain and Portugal and keep Communism at bay while those countries were in transition from dictatorship.

They were made during the height of the Cold War when both nations were emerging from fascism.

At the time, many western governments were concerned that the Iberian Peninsula could easily fall to the Communists during the upheaval.

The head of Chancellor Schmidt's office during that period, Manfred Schueler, has told the BBC that the secret payments were in the context of concerted action by many countries to help the new democracies.

The money originated from the coffers of the German Intelligence Agency, the BND, though it was not, he stressed, an intelligence operation.

Klaus Kinkel, a former president of the BND and later Germany's foreign minister, has confirmed that the system was in operation when he took over the agency in 1979.

It is reported that Germany's two main political parties, the Social Democrats (SPD) and the Christian Democrats (CDU), each received around $6m to pass on to their respective sister parties in Spain and Portugal.

The smaller Free Democrats received a lesser amount.

But there was, according to Mr Schueler, limited possibility to monitor the transfer of funds.

And with the present party financing scandal in mind, allegations have surfaced that some of the money may have been ended up in the coffers of political parties at home.

A CDU spokesman said the party had no comment to make about the allegation.

The current SPD Treasurer, Inga Wettig-Danielmeier, has also denied that any of the money could have been flowed back into the coffers of Germany's political parties.