EU slams Bulgaria on corruption
BRUSSELS (Reuters) - The European Commission issued ascathing indictment of corruption in Bulgaria on Wednesday,suspending aid worth hundreds of millions of euros (dollars)and barring two key payments agencies from receiving EU funds.
A report on the management of European Union funds by thelatest and poorest EU member said the fight against high-levelcorruption and organised crime was not producing results andthe Commission had to act to protect taxpayers' money.
"Therefore, the Commission has taken the decision today toformalise this (aid) suspension and withdraw the accreditationfor two government agencies in charge of managing thesepre-accession funds," chief Commission spokesman JohannesLaitenberger told a news conference.
The two reports on Bulgaria -- one on funds and the otheron judicial reform -- were the harshest criticism ever levelledby Brussels at a member state. A report on fellow newcomerRomania, which also joined in January 2007, pointed topolitical and judicial obstruction of corruption trials butavoided sanctions.
Commission President Jose Manuel Barroso called them "areality check -- they show that both the Bulgarian and Romaniangovernments need to step up their efforts on judicial reform,corruption and in the case of Bulgaria organised crime".
Bulgarian Prime Minister Sergei Stanishev promised actionto remedy the shortcomings. "There is a discrepancy between thepolitical will which is a fact and the achievement of concreteresults," he told a news conference.
Analysts said the Commission was trying to set an exampleto other Balkan candidate countries and to reassure votersdisenchanted with the 27-nation bloc's eastward enlargement.
But the EU executive softened the blow at the last minuteby toning down the toughest wording of earlier drafts andomitting a threat to delay Bulgaria's entry into the eurosingle currency zone and the Schengen area of passport-freetravel.
"MORAL DAMAGES"
The Bulgarian member of the Commission, Meglana Kuneva,told Reuters the report was balanced and her country needed tofulfil its obligations as a full member of the EU.
"We need to advance, and advance quickly. What really hurtme was that we are talking more about problems rather what wehave achieved," she said in a telephone interview.
Laitenberger gave no overall figure for the suspendedfunds, but Commission spokesman Mark Gray cited amounts thatadd up to 486 million euros ($765 million).
Those funds are mainly for the PHARE technical assistanceprogramme for acceding countries, the ISPA road-building schemeand the SAPARD agricultural marketing plan.
Unless the PHARE payments agencies are reformedsufficiently and recover their accreditation by the end ofNovember, 556 million euros will be lost definitively,officials said.
Neil Shearing, an economist at London-based consultancyCapital Economics, said any decision to punish Bulgaria bywithholding EU funds would hit the Balkan economy hard and deala blow to investor confidence.
"If the EU were to hold back fiscal transfers scheduled fornext year, the likely drop in infrastructure investment alonecould cut GDP growth by 1 percent," he wrote.
Bulgaria is due to receive some 11 billion euros in farmsubsidies and regional development aid in the 2007-2013 budgetperiod but has received little so far.
The EU report did credit Stanishev's government withprogress in setting up a national security agency to fightcorruption and organised crime, and closing duty-free shops andpetrol stations that were a focus of crime.
Conservative members of the European Parliament applaudedthe decision to block some EU funds for Bulgaria.
German Christian Democrat Elmar Brok said the situation haddeteriorated in both Romania and Bulgaria since they joined the27-nation bloc and this was "the only way to ensure thecredibility of the EU enlargement process".
(additional reporting by Darren Ennis and Marcin Grajewskiin Brussels and Anna Mudeva in Sofia; editing by IbonVillelabeitia)