Quoting unnamed EU sources, news agency Reuters said the European Commission (EC) was likely to strip Bulgaria of 500 million euro in EU funds and would warn Sofia that it might lose future aid unless it fights corruption harder.

The EC is slated to adopt reports on justice, crime and corruption problems in Bulgaria and Romania on July 23. Drafts of the report are said to have been kept secret even from governments in the two countries.

On July 16, Reuters quoted an EU source familiar with the content as saying that "the scale of corruption and the failings of the judicial system would be censured in both countries, but only Bulgaria stands to lose money immediately."

"In Bulgaria, there are serious, systemic problems. We will be confirming that certain money will be forfeited," Reuters quoted the source as saying on condition of anonymity.

The source allegedly refused to give a figure, but confirmed that it was likely to be around half a billion euro, Reuters said.

Reuters quoted the source as saying that the EC would not trigger a safeguard clause, which could freeze judicial cooperation with Bulgaria and withdraw the recognition by other member states of Bulgarian court rulings, saying that doing so would be counter-productive.

According to an unnamed Bulgarian source quoted by international media, withdrawing the accreditation of payments agencies would be worse than any safeguard clause.

The Reuters report came on the same Bulgarian daily Dnevnik published a copy of a report by anti-fraud office Olaf which said that a powerful criminal network in Bulgaria had misused millions in European funds, linking companies of two Bulgarian businessmen to government circles.