Bulgaria - the same as Romania - could face serious EU membership restrictions and cuts to EU funds after they join, unless they manage to set up agencies managing Europe's funds.

A report presented Tuesday to the European Parliament by Enlargement Commissioner Olli Rehn also warns both states risk farewell to billions of euros, if the required agencies are not in place.

Sofia has also delayed the institutional arrangement for payment of EU farm aids, the EC report says.

Rehn noted that a special monitoring system could be put in place in the first three years after Sofia and Bucharest join if efforts to tackle corruption and reform the judiciary systems do not yield satisfactory results.

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