By Igor Ilic
ZAGREB, Sept 22 (Reuters) - The Croatian government sacked the entire management of state electricity board HEP on Tuesday after allegations of corruption in the European Union candidate's biggest public company.
Newspaper reports have said HEP management provided illegal benefits to employees and analysts say the accusations reflect a wider lack of transparency in public firms, where managers are often promoted thanks to family ties or party affiliation.
"One of the reasons (for the sackings) is the suspicion of abuse of authority, due to which the state prosecutor's office has required an investigation," government spokesman Zlatko Mehun said, without giving details.
Fighting corruption, as well as reforming public administration and the judiciary, is a key requirement for Croatia to advance EU membership talks which resume on Oct. 2. The talks were stalled for nine months by a veto imposed by EU neighbour Slovenia over an old border dispute.
HEP has virtual monopoly in production and distribution of electricity and is one of the biggest firms in the small Adriatic country, with some 14,000 employees. Its revenues last year amounted to 11.9 billion kuna ($2.42 billion) on a net profit of 31.1 million kuna.
The newspaper reports said HEP management had caused financial damage to the company by providing illegal benefits to employees, like buying flats at a discount.
"We welcome the (government's) move as it was clear that something was wrong the moment the investigators started combing HEP's business," said Zorislav Antun Petrovic, local head of Transparency International, a global anti-corruption group.
"What we want to see next is measures that will prevent similar things, or make them more difficult, in the future."
Earlier this month, Standard & Poor's ratings agency affirmed HEP's 'BB+' long-term corporate credit ratings with a negative outlook, noting HEP's liquidity problems, substantial funding needs and the overall deterioration of Croatia's economy.
HEP's new chief executive will be Leo Begovic, currently a state secretary at the economy ministry.
(Reporting by Igor Ilic, edited by Dominic Evans)