PRAGUE (Reuters) - The Prague state attorney said on Friday he had halted a criminal investigation into whether Czech Prime Minister Andrej Babis had abused EU subsidies, ending what had become a major headache for the businessman-turned-politician.

FILE PHOTO: Czech Republic's Prime Minister Andrej Babis arrives to take part in a European Union leaders summit, in Brussels, Belgium July 2, 2019. REUTERS/Piroschka Van De Wouw/File Photo

The investigation into accusations that Babis, his family members and others had manipulated ownership of a farm and convention center to win European Union subsidies more than a decade ago had undermined his political clout. He always denied any wrongdoing.

The case was the major reason why a number of Czech political parties had refused to cooperate with Babis’s ruling populist ANO movement since it swept to power in 2017.

He runs a minority administration together with the center-left Social Democrats that must lean on Communist Party votes to secure a majority in parliament.

The case against Babis, the billionaire founder and former owner of the chemicals, food, farming and media group Agrofert, focused on a 2 million euro subsidy granted in 2008 for building the Stork’s Nest center outside Prague.

Police saw wrongdoing in Agrofert transferring ownership of the Stork’s Nest firm to anonymous owners later revealed to include his wife and other relatives so that it would qualify for the funding, which was intended for small and medium businesses. But prosecutors found this was not illegal.

“The evidence gathering led to the conclusion that the Stork’s Nest Farm met the definition of a small and medium-sized business,” attorney Martin Erazim said in a statement.

“Despite the established connections between (Agrofert and Stork’s Nest), mainly through family members, Stork’s Nest was correctly assessed as an independent company.”

The Prague state attorney’s decision will be reviewed by the supreme state attorney who has the right to overturn it if he finds it at odds with law.

“MEDIA HUNT”

Babis, who entered political life in 2011 when he founded ANO, had earlier called the investigation a plot to force him out of politics.

“If I were not in politics, people would not have heard about Stork’s Nest,” he told a news conference on Friday.

“Since the beginning I was convinced about the innocence of the people who were prosecuted and it is not true that this would be any surprise,” he said.

Asked about potential political pressure on the justice system given his position, he said:

“There has been a media hunt against me and my family for three and a half years. People have shouted in squares that Babis belongs in jail ... so I do not know who was under pressure.”

Despite the investigation, Babis’s ANO party has remained the most popular political force in the Czech Republic, with support close to 30 percent.

The EU’s anti-fraud body OLAF had found multiple breaches of national and EU legislation in the project. Agrofert voluntarily returned the subsidy it had received.

Babis still faces other investigations. One run by the European Commission centers on conflicts of interest he has as a government member and the former owner of Agrofert, which continues to receive tens of millions of euros in EU farming and development subsidies.

Babis says he meets all rules because he transferred Agrofert to two trust funds in 2017 and thus has severed links to it. The funds are overseen by his long-time associates and his wife.