EU suspends £400m in aid to Bulgaria over its failure to fight organised crime

The European Union has suspended hundreds of millions of euros in aid to Bulgaria for its failure to purge the country of crime and sleaze.

The unprecedented move is a major embarrassment for the bloc's newest and poorest member, after it was given repeated warnings to prevent fraud and get to grips with Mafia-style criminal gangs. Bulgaria's dismal performance is also blow to the European Commission, which has struggled to fend off accusations that it was too hasty in welcoming the newcomer last year. The Commission is keen to invite more Balkan countries to join the EU, which has 27 members.

Romania, which was admitted to the EU at the same time as Bulgaria, was also chided for high-level corruption but avoided sanctions. In the strongest criticism ever levelled at a member state, the Commission said "spending irregularities" of aid in Bulgaria were so serious that it would withdraw the accreditation of two agencies handling the EU money.

It will also freeze almost €500m (£400m) in transition funds, which are meant to help governments carry out the reforms needed to become a fully-fledged EU member. The Commission stopped short of delaying Bulgaria's entry to the single currency. "We had to act in order to protect European taxpayers' money," said a commission spokesman. "We need functioning audit systems so that these kinds of irregularities cannot occur. But we are prepared to reverse these decisions as soon as Bulgaria has taken the corrective measures."

In a separate report, Sofia was criticised for failing to reform its judiciary to crack down on sleaze and gangland crime. "Bulgaria needs to drastically curb opportunities for high-level corruption and effectively fight organised crime," an EC progress report said.

"This is a very serious blow for our country," said Meglena Kuneva, Bulgaria's EU commissioner for consumer affairs. "It really harms our reputation. I just hope the political elite will now do what is needed to get us back on track. We need a strong judiciary and proper convictions of criminals."

The government admitted it deserved the criticism. It has been credited with only modest progress, notably in closing duty-free shops and petrol stations that were a focus of criminal activity. "There are grounds for criticism to be honest. Bulgaria has a lot of problems, including the heritage of the transition [from Communism], which in many respects was not the cleanest one," said the Prime Minister, Sergei Stanishev. "The truth is Bulgaria is learning how to work with the European money. And as far as the judicial system is concerned, Bulgarian society shares a lot of the EU's criticism. We do need to introduce mechanisms to make court proceedings quicker," Mr Stanishev said.

Only this week, Bulgarian prosecutors began a trial of a group of businessmen accused of misusing of EU funds. Nine people are charged with participating in an organised crime group.

In an earlier investigation, the EU's anti-corruption watchdog said the gang was under the protection of "influential forces inside the Bulgarian government and/or the state institutions" that were not interested in its punishment.