This article is more than 4 months old

This article is more than 4 months old

The Czech government needs to stamp out “oligarchic structures” in the spending of European funds, a leaked EU report into an alleged conflict of interest centred on the country’s billionaire prime minister, Andrej Babiš, has concluded.

The report, by the European parliament’s budgetary control committee, calls on Babiš to stand down as prime minister or sell his business, if a conflict of interest is confirmed. Babiš should also renounce his seat at the table in upcoming negotiations on the European Union’s next seven-year budget “until his potential conflict of interests is fully resolved”, the MEPs say.

The row centres on millions of euros of EU funds paid to the Agrofert food, farming and chemicals conglomerate, owned by Babiš, the second richest man in the Czech Republic.

The leaked report, seen by the Guardian, is based on a three-day visit by MEPs to Prague in February, and concludes there are “systemic weaknesses in the detection, prevention and abolition of conflict of interests in the Czech Republic”.

The six-strong MEP team, led by the German Christian Democrat Monika Hohlmeier, argues that Agrofert should not receive EU funds until the issue is resolved, while urging the Czech authorities to be more proactive in tackling fraud, corruption and tax crimes.

MEPs also expressed disappointment that Babiš and his agriculture minister cancelled meetings at short notice during their trip to Prague. The visit proved stormy, with Babiš accusing Hohlmeier of being “crazy”, while describing two Czech members of the team as “traitors”. He later apologised for the slur against Christian Democrat Tomáš Zdechovský and Mikuláš Peksa of the so-called Pirate party.

Hohlmeier described the attack as “hate speech”, while Zdechovský said he had received death threats as a result.

In 2018, the Guardian first reported that the EU executive had concluded there was a conflict of interest over €82m (£72m) of EU funds that Agrofert was due to receive that year. The company has received millions since 2014, the year Babiš became finance minister, after entering politics on a populist, anti-corruption platform.

He became prime minister in 2017, despite accusations of a €2m EU subsidy fraud linked to a farm and hotel complex outside Prague called the Stork’s Nest and owned by Agrofert. These allegations triggered an unprecedented investigation by the EU’s anti-fraud office into a sitting head of government. The Guardian has asked the European commission and EU anti-fraud office Olaf to confirm the status of the investigation.

Prague’s state attorney announced it was halting an investigation in September last year.

Facebook Twitter Pinterest Andrej Babiš was the subject of an investigation by the EU’s anti-fraud office Photograph: Christian Hartmann/Reuters

Babis and Agrofert have always vigorously denied all claims of wrongdoing.

When Babiš became finance minister he said Agrofert was put into a blind trust, but transparency campaigners later claimed he remains the beneficial owner.

The latest report is a damning indictment of different arms of the Czech government, leaving MEPs “under the impression that there appears to be no interest on the Czech side” to ensure correct spending of EU funds.

The European parliament has also raised the alarm about pressure on civil servants. MEPs fear Czech officials refusing to break the code of conduct on an independent and impartial civil service risk being dismissed. Members of the supreme audit office, responsible for monitoring public spending, told MEPs they had been harshly criticised in public by the government.

The EU has since begun fraught negotiations on agreeing a new €1tn budget, with pressure from France, Germany and other western member states to link payments to respecting the rule of law.

The Czech Republic is one of the biggest per-capita recipients of EU funds, along with Hungary, whose prime minister is also under the spotlight, after his friends and family became wealthy on EU-funded infrastructure contracts.