Bulgaria loses EU millions for failure to tackle corruption

In an unprecedented move, the European Union's executive arm upheld a suspension of 220 million euros (282 million dollars) dating from July -- effectively ensuring that the money cannot be spent by a Sunday deadline.

Bulgaria expressed disappointment about the decision, but vowed to press on with reforms to guarantee delivery of the remaining assistance.

"This is not the most pleasant day of my life. As they say, the man's gotta do what the man's gotta do," EU Enlargement Commissioner Olli Rehn told reporters in Brussels.

"Bulgaria is an economic success story and a very committed and constructive EU member state, but there is another problem, which is the protection of taxpayers' money and proper management of funds," Rehn said.

"We have to play by the book and respect the rules of financial management. Therefore there is, for the moment, no other option."

The European Commission froze 825 million euros in farm, road and regional development subsidies in July amid concerns of possible fraud and conflicts of interest.

It threatened more sanctions if effective measures were not taken.

Some money came from the EU's PHARE programme -- designed to help Bulgaria prepare for its January 2007 accession to the bloc -- by funding infrastructure projects, and helping to strengthen institutions and the rule of law.

But Sofia lost access to the money, as it was deemed to have failed to correctly manage the funds, with the deadline to use the money expiring on November 30.

"We hope that Bulgaria will now take urgently the necessary steps to improve the management of the funds," said commission spokeswoman Krisztina Nagy.

"In the case of PHARE, these measures unfortunately would come too late and thus considerable amounts of PHARE funding can no longer be used by the Bulgarian authorities," she said.

"We are talking about 220 million euros."

Bulgaria responded to Brussels' criticism in October by setting up a special unit of prosecutors to investigate mismanagement of EU money. It also passed the country's first conflict-of-interests law and drew up an action plan.

But its moves were deemed insufficient.

"Most of the measures are only a promise of future action and have not yet delivered concrete results," Nagy said.

She said a further 340 million euros frozen this year could be lost if no action is taken, saying: "The jury is still out, so we will have to see what kind of improvements can be made."

Sofia's continued failure to come up to scratch could also jeopardise some of the 11 billion euros in funds earmarked to be handed to Bulgaria by 2013.

Bulgaria's deputy premier for European Union fund management, Meglena Plugchieva, said the commission's move "is unexpected and a disappointment for Bulgaria and its administration."

But she vowed: "The Bulgarian authorities will nevertheless continue working at the same accelerated rates and strictly implement the European rules and procedures to guarantee the correct and transparent use of all European funds."

Since it joined the European Union, once-communist Bulgaria has remained under strict surveillance in several sectors -- its justice system, management of EU funds, food safety and aviation security.

But while progress has been seen in the latter two, the others have been the constant focus of criticism in the 27-nation bloc.

But a conservative German member of the European Parliament, Ingeborg Graessle, said the commission itself was partially to blame for the problem by not doing enough to warn Bulgaria.

"The commission took too long to tell them that they were in a dangerous situation and that they risked losing the money," she said.

A former road fund official whose attempt to get bribes from an architect helped persuade the European Commission to freeze funding was jailed for five years Tuesday.

Ivan Vladimirov was found guilty of having sought 50,000 leva (25,500 euros, 33,100 dollars) in exchange for approving an architect's project, the court heard.