Nadia Damon in Sofia -

As expected, the EU has officially lost patience with Bulgaria's tardy progress in reforms to tackle corruption and introduced further sanctions in an attempt to bring the Southeast European country back into line. Given that an accompanying report by the bloc's anti-fraud unit, OLAF, was leaked to the press ahead of its official release, reportedly by members of Bulgaria's supreme judicial council, relations between the EU and Bulgaria are likely to get worse before they get better.

In its annual report on the country, released on July 23, the European Commission has moved to scrap the distribution of more than €800m and stripped two of Bulgaria's financial agencies of their rights to handle funds.

After repeated warnings - as well as sanctions on funds issued for development during the 2000-2006 period - the Commission has removed the rights of the Central PHARE Finance and Contracts Unit at the Ministry of Finance and the PHARE Executive Agency at the Ministry of Regional Development and Public Works. The confiscated funds comprise €150m allocated under the ISPA Programme (formerly managed by the Republican State Agriculture Fund); €121m under the SAPARD Programme; €250m distributed through the PHARE Programme. According to Bulgarian news service, Novinite, a further €360m of PHARE funds, which were expected to be negotiated by the two agencies by the end of the year, have been suspended, which brings the overall suspension figure to €881m.

The Commission stated that Bulgaria's continuing failure to tackle widespread corruption had led to the measures. "The fight against high-level corruption and organised crime is not producing enough results," chief Commission spokesman Johannes Laitenberger explained, as he presented the two reports on Bulgaria, which joined the EU, along with neighbouring country, Romania, on January 1, 2007. "While there has been movement on a few cases, many alleged cases go unpunished," he told a press conference.

"The commission has taken the decision today to formalise the suspension of certain payments and to withdraw the accreditation of two government agencies in charge of managing these funds," Laitenberger explained. He said that the Commission was prepared to reverse the decision as soon as Bulgaria has taken the necessary corrective measures. While further improvements were outlined concerning Romania, Bulgaria has borne the brunt of the Commission's criticism and action.

Earlier this year, the EU temporarily suspended funds allocated to Bulgaria under the SAPARD, PHARE and ISPA aid programmes. These included agricultural payments and assistance relating to infrastructure development and to the aid period spanning 2000-2006. Laitenberger explained that these temporary measures had been taken due to violations within the systems for audit and control. While he acknowledged that improvements had been made in these areas, Laitenberger stated that the EC still does not yet have the sufficient confidence to lift the suspension.

Laitenberger reiterated that both Bulgaria and Romania have declared their commitment to improve their justice systems and to put more effort into fighting corruption. While he insisted that he was not comparing the two Balkan countries, he claimed the reports would highlight what more could be done in both countries.

According to Laitenberger, the situation in Romania is more complicated. While the basic elements of a functioning system are already present, he insists it is fragile - and any decisions taken in relation to the tackling of corruption were to a great extent politically motivated. According to the report, Romania's commitment to reforms in the key institutions had not been steadily implemented, and it still needs to demonstrate its willingness to punish high-level corruption.

In reference to Bulgaria, however, Laitenberger insisted that judicial reforms were crucial. And while Bulgaria was recognised for reforming the Interior Ministry and founding the State National Security Agency, the Commission's monitoring would now focus on further progress. "Monitoring from this point onwards is to show if these measures bring actual results through investigation and launching legal proceedings against corrupted high-level officials," he said.

While strong lobbying from the Bulgarian government in recent days led to the report being watered down - according to the BBC, a warning that corruption allegations could delay the country's admission to the Schengen passport-free area and the Eurozone were removed), Sofia faces intense pressure on the back of the EU's criticism. As the country waited for the Commission's report to be issued, Bulgaria's opposition party filed their the sixth no-confidence vote against the three-way ruling coalition over its failure to adhere to the rules of the EU and in the absorption of EU funds. More than 80 MPs have signed the demand for the vote.

The government is also embarrassed over the leaking of the report by the EU anti-fraud agency OLAF, which accuses a crime group of defrauding the EU of aid even as Bulgarian authorities looked on. According to Euractiv, OLAF's report was forwarded to the press by members of the supreme judicial council after a meeting between Bulgarian Vice-Prime Minister Meglena Plugchieva and the magistrates on July 15. Plugchieva reportedly said she was "unpleasantly surprised" by the leak and that the magistrates had undermined their co-operation by forwarding the top-secret document to the media. A Commission spokesperson stated that leaks of confidential information would weaken the prospect of improved co-operation between the organisation and the Bulgarian administration.

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