CHISINAU (Reuters) - The European Union said on Wednesday it had frozen a 100 million euro aid package to Moldova after a disputed mayoral election race in the capital Chisinau which critics say undermined the country’s democratic credentials.

The EU and the United States support Moldova’s pro-Western government but have strongly criticized a court decision last month to void the result of an election won by a former prosecutor who is a vocal critic of the ruling party chief.

The court decision prompted thousands of people to take to the streets in protest. It spells more instability for one of Europe’s poorest countries where pro-Western political forces have been damaged by corruption scandals and could lose power to the pro-Russian Socialist party in elections in November.

The Supreme Court upheld a June 19 decision overturning the victory of pro-transparency candidate Andrei Nastase.

Nastase says the ruling was delivered at the behest of Vlad Plahotniuc, the leader of the ruling Democratic Party and a powerful businessman, who denies interfering in the case.

Many Moldovans say Plahotniuc has excessive influence over the cabinet, police and media, though he holds no formal government role.

Disbursements under the Macro-Financial Assistance program hinge on the successful implementation of specific economic policy measures laid out in a Memorandum of Understanding and the fulfillment of political preconditions related to respect for democratic mechanisms, the rule of law and human rights.

PRECONDITIONS

The EU has earmarked 100 million in assistance to Moldova in 2017-2018 but says Moldova has not fulfilled the preconditions of respecting democratic mechanisms and the rule of law.

“This assessment is based on the recent political events in Moldova and, in particular, the decision of the Supreme Court of Justice of 25 June on the invalidation of election results in Chisinau,” it said in a statement. “The disbursement of the first tranche under the current Macro-Financial Assistance program has, therefore, been put on hold.”

The government had expected the EU to disburse the money after securing $33.8 million in aid from the International Monetary Fund last week.

Prime Minister Pavel Filip denies interfering with the judiciary, while Plahotniuc said it would be “dangerous and unfair” for the government to try to overturn the Supreme Court’s decision.

Nastase is due to present his case to the European Parliament on Thursday and has announced more street protests in August.

A statement by the U.S. State Department last week said the court’s “unusual and unwarranted decision thwarts the electoral will of the Moldovan people and damages respect for the rule of law and democratic principles in Moldova”.