The European Commission will issue a withering indictment next week of high-level corruption, maladministration and failures in the handling of European Union funds in new member state Bulgaria, according to a draft of the report.
The report on the management of EU funds in the most recent and poorest newcomer, seen by Reuters today, said: "High level corruption and organised crime exacerbates these problems of general weakness in administrative and judicial capacity."
As a result, it said, Brussels has barred four Bulgarian agencies from handling EU funds because of corruption, freezing nearly €1 billion ($1.6 billion) in pre-accession aid and threatening future payments, the document showed.
Prime minister Sergei Stanishev has accused the EU of overstating the corruption problem in Bulgaria.
But the report, described by EU officials as the most scathing ever written about a member state, is due to be adopted by the EU executive next Wednesday, and changes are still possible.
EU officials said the final figure for frozen funds may be smaller because some of the money has already been spent, but Sofia stands to lose nearly half a billion euros by the end of the year unless it can remedy flaws in its payments agencies.
"Bulgaria is not able to reap the full benefits of this assistance because of critical weaknesses in administrative and judicial capacity, be it at local, regional or central level," said the report.
"Urgent action is needed because deadlines for contracting some of the funds are approaching after which the funds will be lost to Bulgaria," it said.
Bulgarian Deputy Prime Minister Meglena Plugchieva, who was appointed this year to clean up the handling of EU funds, was in Brussels to meet the EU anti-fraud agency on Friday.
A partial draft of that report, which is to be adopted on July 23rd, was handed to the Bulgarian government on Thursday for factual checks, without the key sections on the next steps to be taken and the conclusion.
The biggest chunk of money at risk is in the PHARE programme, which provided technical assistance to central European countries before they joined the EU.
The report said payments to two key implementing agencies had been suspended, estimating the amount of funds affected to be around €610 million, of which €250 million has not been contracted.
"As a consequence, these agencies will not be allowed to contract until they can guarantee that effective, functioning management and control systems are in place," it said.
The other agencies affected are the National Authorising Officer for the SAPARD agricultural marketing programme, with €210 million yet to be paid, and the National Road Infrastructure Fund, for which funding for road building worth €144 million has been frozen.
Reuters