Faced with the leaking to the media of a report by the European Commission’s anti-fraud office that said that a powerful criminal network in Bulgaria had misused millions in European funds, the Government bashed the media, and the opposition bashed the Government.

A copy of the report by anti-fraud office Olaf was posted online by Dnevnik on July 16 2008. The report said that there were influential forces inside the Bulgaria Government and the state institutions in general which had no interest in punishing any individuals in what the report referred to as the “Nikolov/Stoikov group”, which is under investigation for projects fraudulently funded with 6.5 million euro in EU cash, Franz-Herman Breuner, director of the EU's anti-fraud office Olaf, says in an official letter to deputy prime minister Meglena Plougchieva.

The letter was sent two weeks before the release on July 23 2008 of a much-anticipated European Commission report on Sofia's performance in tackling organised crime and corruption.

The report estimates at 32 million euro the cost of projects that have been tainted by EU funding irregularities. The report says that the Nikolov/Stoikov group is a “criminal network composed of more than 50 Bulgarian enterprises and various other European and off-shore companies.

“This criminal company network is managed and/or financed by two Bulgarian individuals, Mario Nikolov and Lyudmil Stoikov, who are said to have close links to the current Bulgarian government,” the report says.

“One of the individuals allegedly financed the election campaign of the current Bulgarian president and is the business partner of the former deputy foreign minister, who, according to information available, attempted to influence an ongoing investigation into that individual,” according to the report.

Speaking at a Cabinet news conference on July 16, Prime Minister Sergei Stanishev said that the media had over-reacted to the report, saying that every EU member state had problems with the suspension of EU funds.

“We have been learning how to work with the EU funds,” Stanishev said, according to a report by Bulgarian National Radio.

He said that Bulgaria had not sheltered with a “political umbrella” anyone involved in infringements of European funds. The difficulties in the report were no surprise and the Government was taking steps to overcome them, he said.

The practice of leaking correspondence between Bulgarian and European institutions was “bad and vicious,” Stanishev said.

The Government saw Olaf as a partner in fighting corruption, he said.

Meglena Plougchieva, the deputy prime minister appointed earlier this year to oversee the use of European funds, expressed regret that the report had been leaked, saying that it was intended for prosecutors and the judiciary to follow up to check whether the alarming conclusions in it were true.

The leaking of the report did not help the institutions but instead diminished their authority, she said. Plougchieva said that the European institutions were “indignant” about the publication of the report.

Prosecutor-General Boris Velchev also expressed regret that the report had been leaked.

A few days before the July 16 media reports about the Olaf report, a group of opposition parties had announced that they would table in Parliament a motion of no confidence in the Cabinet on the grounds of Bulgaria’s incompetence in dealing with European funds. Huge sums in Sapard funding have been suspended because of irregularities.

Sofia mayor Boiko Borissov, leader of the Citizens for the European Development of Bulgaria (known by its Bulgarian abbreviation as GERB), the party widely expected to get the most votes in the parliamentary elections scheduled for 2009, reacted to the Olaf report by making the latest of his frequent calls for the Government to resign.

Centre-right opposition party the Union of Democratic Forces, one of the parties backing the planned motion of no confidence, said that President Georgi Purvanov, whose election campaign allegedly received funding from an individual in the Nikolov-Stoikov Group, should be suspended from office.