A total of 543 million euro of financing under the EU’s Instrument for Structural Policies for Pre-Accession (Ispa) is hanging in the balance for Bulgaria, a new government report warns.

According to the first-half report on EU financing absorption prepared by the sector parliamentary committee, Bulgaria anticipates to dish out 137 million euro on top of the nearly 800 million euro paid out so far out of the scheme’s 1.47 billion euro budget. Absorption has been increased by nine per cent over the past year.

Ispa, which expires at the end of 2010, finances 40 large-scale infrastructure projects in Bulgaria in the transportation and water supply sectors.

"There is a real threat that a significant portion of the Ispa-financed projects may not be completed by December 31 2010 and have therefore been identified as risky," according to the report.

"The major risks concern increases in contract values, possibly as a result of loss of part of European co-financing and subsequent increase in financing from the national budget and government loans to ensure successful completion."

Speaking to Dnevnik, Bulgaria’s minister in charge of EU fund absorption Tomislav Donchev said that the potential loss is hard to pinpoint as the government is currently holding talks with the European Commission (EC) seeking extension of the deadlines.

He reminded that Brussels has agreed in principle to extend by a year the deadline for the sewage projects in Kyustendil, Sliven and Sofia as well as for the construction of flue gas desulphurisation units at Bulgaria’s Maritsa East 2 coal-fired thermal power plant. The Commission has also given its nod in principle for a two-year extension to build the second Danube bridge linking Vidin and Calafat.

Bulgaria’s Ministry of Environment has requested 231 million leva of public monies to be lined up in Budget 2011 to carry out development of projects that had to be financed under Ispa, said deputy minister Ivelina Vasileva. She pointed out that this is a pessimistic forecast that excludes extension of project deadlines by the Commission.