The European Commission will tell Bulgaria and Romania tomorrow they can join the European Union in January but may forfeit hundreds of millions of euros in membership benefits.
A keenly awaited progress report by the EU executive, seen by Reuters, will give a green light for the Balkan duo to join the EU in 2007, rather than 2008, but it will propose the toughest entry conditions ever imposed on newcomers.
The mixed message from Brussels reflects widespread public unease about further enlargement of the 25-nation bloc, putting pressure on EU leaders to slow further expansion plans.
The Commission's chief, Jose Manuel Barroso, repeated toay that it would be unwise for the EU to enlarge further after Bulgaria and Romania join without overhauling institutions to ensure the bloc's decision-making remains efficient.
"Enlargement fatigue" helped to sink the EU constitution in French and Dutch referendums last year, robbing the bloc of a framework for further expansion. The current treaty provides for a maximum of 27 members before institutional changes are needed.
"We cannot go on enlarging without clarifying the institutional issues, voting and decision making," Mr Barroso told a news conference after talks with French Prime Minister Dominque de Villepin.
EU leaders agreed in June to seek a solution for the stalled EU constitution by the end of 2008.
Mr Barroso's comment could mean a slight delay for Croatia, which launched EU entry talks last year along with Turkey and hopes to complete membership talks by 2009.
However, Turkey is not expected to join for at least 10 more years, by which time the EU is likely to have completed the reforms.
The conditional sanctions for Bulgaria and Romania are meant to reassure critics of enlargement who say the countries are too poor, corrupt and weak administratively to cope with EU membership, officials say.
Doubts about east European newcomers have been raised by instability in some of the biggest states that joined in 2004, highlighted by anti-government riots in Hungary and the break-up of Poland's conservative-populist coalition last week.
Unless Bulgaria and Romania meet reform targets set in the report, the Commission may propose excluding them initially from some common EU policies and freezing part of the bloc's aid for agriculture and regional development.
The EU executive cites "a number of areas ... where the Commission will initiate appropriate measures to ensure the proper functioning of the EU, unless the countries take immediate corrective action," the draft report said.