The European Parliament has suspended payments for its Strasbourg site and threatened to bring in fraud investigators after it emerged that millions of euros of rent are being creamed off by French local authorities.
Senior MEPs believe that the City of Strasbourg may have been overcharging them for the parliament's site for the past 25 years, and that as much as €2.7m (£1.9m) of taxpayers' money could have been kept by the Alsace municipality last year.
Amid mounting anger, MEPs have set up a special inquiry and are expected to delay giving their approval for the parliament's entire annual accounts.
Moreover the startling discovery, which emerged during negotiations for the purchase of two buildings in Strasbourg, is likely to intensify the debate over the future of the European Parliament's "travelling circus". Under a deal agreed by EU leaders in 1992, the Parliament moves from its Brussels home to Strasbourg for roughly one week in four.
The Strasbourg buildings are owned by SCI Erasme, a Dutch property fund, and are let to the City of Strasbourg, which in turn sublets them to the Parliament. In exchange for selling the buildings - named after Winston Churchill and Salvador de Madariaga - the City of Strasbourg has demanded €29m, which it describes as compensation for surrendering a lease due to run to 2047.
While probing the reason for this demand, MEPs discovered that the City of Strasbourg is pocketing money from the taxpayer. A private document circulated to the parliament's budgets committee says that "the rent paid by the City to SCI Erasme is considerably less than the €10m a year that the Parliament pays to the City".
Jan Mulder, a Dutch Liberal and vice-president of the parliament's budgets committee, said he was "very surprised" to make the discovery that cash is being withheld, adding that "it could have been happening for the last 25 years".
He added: "We have asked the City of Strasbourg [to explain]. They have not been forthcoming. They have more or less said 'mind your own business'." One explanation, that the payments were to cover construction near the parliament including roadworks, was not supported by any evidence, Mr Mulder added.
An alternative reason for the payment might be that it represents an insurance premium against the possibility that the European Parliament may quit its Strasbourg site, leaving the building empty. But, under an agreement written into an EU treaty, MEPs are obliged to spend one week in four in the city, and that can only be changed with the approval of all EU governments, giving France a veto against such a move.
Last night a joint declaration from the parliament's Committee on Budgetary Control and its Committee on Budgets demanded from the City "access to all financial and other documents" concerning the two buildings and the relationship with SCI Erasme.
It warned: "Failure to comply with this request within an appropriate timescale would lead to the European Parliament lodging a complaint with the European Anti-Fraud Office."
Jeffrey Titford, a UK Independence Party member of the European Parliament's Budgetary Control Committee, said: "We need to know why the matter only came to light because of revelations in a French local newspaper. Why didn't the parliament's own internal procedures expose the appalling manner in which the tenancy agreements had been handled? This could potentially be one of the worst examples of euro corruption yet seen."
Chris Heaton-Harris, a Conservative member of the committee, said: "It is clear that the City of Strasbourg has been pulling the wool over our eyes for years and have siphoned of millions of EU taxpayers' money.
"It's farcical that we have to be uprooted once a month anyway for a four-day session that can easily be accommodated in Brussels, but we have to go as its written into the founding treaties. Now to find out that we have been swindled by the city in the process is the final straw."
Terry Wynn, a Labour spokesman on budgets, said that while he would await all the evidence, "at first glance it looks pretty bad".
The City of Strasbourg did not provide a response when contacted last night.Reuse content