This article is more than 1 year old

This article is more than 1 year old

The billionaire prime minister of the Czech Republic has been accused of a conflict of interest over European Union funds paid to his company, according to a leaked report.

The allegations will intensify pressure on the tycoon-turned-populist politician Andrej Babiš, who has been embroiled in scandal since taking office a year ago. Babiš faced calls for his resignation earlier this month when thousands of protesters took to the streets of Prague over allegations of a €2m (£1.8m) EU subsidy fraud.

The latest allegations centre on EU funds paid in 2018 to the prime minister’s business empire, Agrofert, a conglomerate of 230 companies covering agriculture, food and chemicals.

A confidential European commission legal opinion seen by the Guardian concludes that Babiš is in a situation that “qualifies as a conflict of interest”, because public officials and politicians should not benefit from EU funds they ultimately control. The taxpayers of the Czech Republic face being asked to repay at least some of the €82m paid to Agrofert in 2018, but the final bill could be much higher.

Brussels urged to investigate Czech PM over business empire Read more

Senior commission officials are investigating tens of millions of other grants handed to Agrofert since 2013, the year his Action for Dissatisfied Citizens party first ran for election on an anti-corruption platform.

The European commission, which oversees EU grants for farmers and poorer regions, was asked to investigate Agrofert after transparency campaigners said they had evidence that Babiš remained the beneficial owner of the conglomerate, in breach of Czech and EU law.

The question was passed to the commission’s legal service, which has concluded that the “impartial and objective exercise of his functions as a prime minister in relation to management of ESI [economic development] funds … are compromised”.

Apart from the conflict of interest over the “direct economic interest of Mr Babiš, there might be other circumstances that may equally qualify as a conflict of interest,” the report states.

Commission lawyers studied only whether Babiš had breached the EU’s 2018 financial regulation relating to one strand of EU funds. But the legal opinion also raises the possibility that Babiš may have been in a conflict of interest when he was finance minister, under the EU’s earlier financial regulation.

The document, which has been shared with the head of the EU’s anti-fraud office, concludes funds “will need to be subject to financial corrections”, meaning repaid.

The Agrofert group has received tens of millions in European structural and investment funds since 2013 – to build, for example, roads and railways, renewable power plants and boost rural economies. Money has been targeted at former communist states to help their economies catch up with western countries, a policy that has made the Czech Republic one of the biggest recipients per capita of EU largesse.

Agrofert has previously rejected all claims as false.

Bart Staes, a Belgian Green MEP who has been following the case for the European parliament’s budget control committee, said Babiš should sever all links with Agrofert or quit. “If he doesn’t do that … then he has to resign,” he said.

The conflict of interest “probably” extended to other EU funds such as farm subsidies, Staes added. “Now the time has come for the commission to undertake action.”

The MEP, who has served on the parliament’s financial watchdog for 19 years, said he had never seen such a case involving an EU leader.

In an emailed statement to the Guardian, Babiš said the EU analysis was the same “lies” and attacked Transparency International – which brought the complaint to the commission – for “spreading nonsense”.

Asked about the commission’s legal opinion he resent a three-page existing statement in the name of two Agrofert trustees. It states that Babiš has not broken Czech or Slovak law. “Mr Babiš is not in breach of the act on conflict of interest,” the text states, adding that he had no control of Agrofert or associated companies.

Agrofert has also previously rejected the claims as false.

Czech government spokespeople did not immediately respond concerning the allegations relating to Toman, but Babiš said they were the same lies.