The European Commission warned Bulgaria and Romania today that their accession to the EU could be delayed by a year unless they step up political and legal reforms and act to tackle high-level corruption.

The two Balkan states are due to join the EU on January 1, but the European Commission said in a progress report today that it was deferring its decision on entry pending a review on October 1.

The report was especially critical of Bulgaria, which was accused of dragging its feet on corruption, organised crime and money-laundering.

"Indictments, prosecution, trials, convictions and dissuasive sentences remain rare in the fight against high level corruption. Bulgaria needs to demonstrate clear evidence of results in these areas," it said.

Romania, which has a population of 22 million, and Bulgaria, which has eight million, missed out on the EU's "big bang" enlargement of 2004 because it was judged that they were too far behind on the path of market and adminstrative reforms. It was, however, agreed that they should join from 2007.

Since that enlargement, which saw eight Eastern and Central European nations plus Cyprus and Malta, join the bloc, appetite for enlargement in Western Europe has fallen away and many now question whether either is yet ready for EU membership.

But although the EU could decide to delay their accession by a year, to January 1, 2008, that would need the agreement of all 25 EU member states, including some East European states that are eager to see Romania and Bulgaria join the bloc.

Jose Manuel Barroso, the EC President, told the European Parliament today: "No later than early October there will be a review on outstanding issues - and a review of whether January 1, 2007 can be maintained.

"The possibility of being ready on January 1 2007 is do-able, but it is now for the two countries to take definite action. Accession next year is subject to strict conditionality."

Senhor Barroso said the and Olli Rehn, the EU Enlargement Commissioner, would travel to Bucharest later today and to Sofia tomorrow to explain the deferral.

EU officials are particularly worried about the looming accession of Bulgaria, where powerful crime barons blamed for scores of underworld assassinations still control large parts of the economy.

Romania’s biggest shortcomings were mostly technical, such as EU-compatible computer systems for tax collection, poor food hygiene standards and a failure to set up agencies for paying the bloc’s massive regional and farm aid, although Senhor Barroso said both countries had to tackle high-level corruption and ensure the independence of their judiciaries.

Both countries were also warned they could lose out initially on EU aid unless they swiftly create institutions to oversee the funds. Romania and Bulgaria are to receive EU aid worth £7.8 billion and £3.1 billion, respectively, between 2007 and 2009.

Enthusiasm for enlargement has dwindled markedly since French and Dutch voters rejected the proposed EU constitution in referendums last year, throwing a shadow over entry negotiations with Turkey and Croatia and with other Balkan states still queueing up for membership.

Reaction to the EU report was generally positive - even in the the two states concerned. "We have 227 days left. We can do it. The report should be used as a manual for dealing with the problems," said Meglena Kuneva, the Bulgarian Minister for EU Affairs.

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