PRAGUE/BRUSSELS (Reuters) -The European Commission told the Czech Republic on Monday it would halt the payment of some EU subsidies until the country tightens its laws to guard against conflicts of interest.
The EU executive concluded in an audit released in April that Prime Minister Andrej Babis was in a conflict of interest as final owner of a business empire, mainly under the Agrofert group of companies, that receives EU funding.
Babis has repeatedly insisted he has not broken any laws, having moved his business holdings into two trust funds.
But on Monday, the Commission said it would not reimburse any spending on EU projects claimed by companies held by trust funds for now.
"As long as all the recommendations formulated in the (audit) report are not carried out, we are advising the Czech authorities not to declare expenses that are due for companies whose beneficial owners are trust funds. It's a warning," the Commission said.
While spending by Agrofert is already not being reimbursed, the Commission feels the issue might be wider, an EU official said.
"There is real concern that the risks that surfaced around Agrofert may be replicated with other companies," the official said.
The Commission also asked Czech authorities disbursing EU funds to keep a log of public officials and the companies they control, Czech Radio reported. A list of trust fund recipients should be sent to Brussels, it said.
Agrofert is one of the country's largest employers in agriculture, food processing, chemicals and media.
As such it has received tens of millions of euros in direct farm payments - which have not been the subject of the EU probes - and also smaller amounts for development projects such as innovative technology under various programmes.
A spokesman for Agrofert said it had no information about the letter because the issue was between the Commission and the Czech authorities.
Regional Development Minister Klara Dostalova told a televised news conference that her ministry would coordinate efforts to swiftly comply with the Commission's demands.
Babis's centrist, populist ANO movement leads opinion polls ahead of an Oct. 8-9 election despite the conflict of interest row and a separate investigation into suspicions of subsidy fraud. Babis denies any wrongdoing in that case too.