Bulgaria orders action on graft as EU freezes aid

SOFIA, July 23 (Reuters) - Prime Minister Sergei Stanishev ordered urgent measures to step up Bulgaria's fight against graft on Wednesday after the European Union suspended aid payments, citing high-level corruption and organised crime.

"We are working on an action plan that is expected to be ready by the end of this week," the Socialist prime minister told a news conference in the Black Sea city of Varna which was broadcasted live on national radio.

"I will require concrete measures, proposals and deadlines for their implementation," said Stanishev, adding that he regretted the move by the European Commission.

"This is necessary so that Bulgaria can present its efforts in a more convincing way. There is a discrepancy between the political will which is a fact and the achievement of concrete results," Stanishev added.

A report on the management of EU funds by the poorest EU member said on Wednesday the fight against high-level corruption and organised crime was not producing results and the Commission had to act to protect taxpayers' money.

As a result, the commission suspended aid worth hundreds of millions of euros and barred two key payments agencies from receiving EU funds. Commission spokesman Mark Gray quoted amounts that add up to 486 million euros ($764.6 million).

Stanishev urged all government institutions to speed up work to prove Bulgaria was serious about fighting graft and organised crime. He acknowledged that some reforms had encountered political resistance.

Diplomats and observers say Bulgaria's key challenge is to cut links between politicians, magistrates and organised crime groups, which they say lie at the heart of the problem.

Stanishev said he was glad that the final text of the EU report was softened as initial drafts contained "unfair and totally unacceptable" conclusions.

"One of the drafts talked about cleansing of the administrative and judicial systems. That is totally unacceptable. We cannot import civil servants from abroad," said the premier.

The EU executive softened the blow at the last minute by toning down the tougher wording of earlier drafts and omitting a threat to delay Bulgaria's entry into the euro single currency zone and the Schengen area of passport-free travel.

Stanishev also rejected calls from opposition parties to sack ministers responsible for EU funds and added he had already made structural changes in the government. (Reporting by Anna Mudeva; Editing by Jon Boyle)