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EU withholds $33 million loan to Moldova over justice reform hold-up

CHISINAU (Reuters) - The European Union will not transfer a final tranche of loans worth 28 million euros ($33 million) to support Moldovan justice reforms as the authorities have not fulfilled the required conditions, the EU delegation to Moldova said on Wednesday.

The European Union is the ex-Soviet nation’s largest external donor, but payments have been frozen or repeatedly delayed by slow reform progress and political upheaval.

“The EU has closely observed the reform process and noted that the Moldovan authorities showed insufficient commitment to reforming the justice sector,” the delegation said in an online statement.

“The Moldovan authorities have not fulfilled the EU’s conditions for receiving the last financial transfer under the justice reform program, which amounts to 28 million euros,” it said.

The disbursement of other EU funding, including a 100 million euro ($117 million) macro-financial assistance package of loans and grants for 2017-2018, has also been delayed.

Last week, Prime Minister Pavel Filip said Moldova would not receive any financing under the agreement this year.

The EU has said a basic precondition for the financial assistance is a respect for the democratic process and the rule of law.

Nevertheless Moldova this year introduced a new electoral law that a pan-European rights body ruled could make the system more susceptible to undue influence by vested interests.

Moldova’s economy grew 4.1 percent last year, recovering from a contraction of 0.4 percent in 2015 due in part to an economic crisis in nearby Russia that hit exports and remittances from Moldovans working there.

The country, Europe’s poorest, has also been rocked by a scandal that saw the equivalent of an eighth of its gross domestic product stolen from three of its largest banks between 2012-2014.

The World Bank and International Monetary Fund have forecast growth of between 4 and 4.5 percent in 2017.

Reporting by Alexander Tanas; writing by Alessandra Prentice; editing by Peter Graff