Czech Prime Minister Andrej Babiš’ links to the agro-chemical giant Agrofert represent a conflict of interest and EU subsidies could be withheld as a result, according to an NGO’s account of a letter it received from the European Commission.

Ahead of his return to power in December 2025, Babiš placed Agrofert in a trust fund in an effort to preserve its eligibility for EU farm cash. However, that appears not to have convinced Brussels. Transparency International Czechia quotes a letter from DG AGRI Director-General Elisabeth Werner, confirming that “the Commission concluded that Mr Babiš’ situation constitutes a conflict of interest” under EU financial regulations.

The trust fund and “measures currently being implemented and notified to the Commission are insufficient” to resolve it, she adds, according to the watchdog NGO, which said it was not allowed to publish the letter.

Babiš has been under renewed scrutiny over Agrofert — a large agro-chemical conglomerate and a major recipient of EU funds — as well as other companies since his return to power last year. Babiš placed the company in a trust fund in a bid to avoid a conflict of interest, but the arrangement has raised questions from both the Commission and the Czech opposition, partly because his children would benefit from it after his death.

Babiš has repeatedly denied any wrongdoing. “I don’t own Agrofert, I never will again and I don’t benefit from it in any way. I don’t know what else I’m supposed to do,” he told Czech media last month. “Apparently, even if I shot myself, it still wouldn’t be enough.”

Babiš’ office did not immediately reply to POLITICO’s request for comment about the contents of the letter.

Werner warned in the letter that Brussels would take all necessary steps to protect EU funds, “including the possible interruption of payment deadlines, suspension of payments or application of financial corrections,” according to TI Czechia.

TI Czechia Executive Director David Kotora told POLITICO that he received the letter in September. A follow-up letter from Werner dated Oct. 5 gives the NGO permission to share the contents of the letter without publishing it.

The conflict-of-interest dispute echoes Babiš’ first term as prime minister, when a Commission audit found he still controlled Agrofert. That left Czech taxpayers to foot the bill for EU subsidies deemed to be erroneously paid.

History could now repeat itself as Brussels last month froze €3.18 million in reimbursements to the Czech state for farm subsidies paid out to Agrofert. That followed its earlier May decision that it would not reimburse any paid-out subsidies until doubts about his involvement in the business could be put to rest.

Commission spokesperson Louise Bogey confirmed it had sent a letter to TI Czechia in September, but would not comment on its content. However, she pointed to her remarks at a Sept. 8 midday briefing, during which she said Babiš was in a “potential conflict of interest” and that “the Commission considers the trust fund set up by Mr. Babiš does not sufficiently mitigate this situation.”

Czechia’s agricultural paying agency, which earlier decided that the conglomerate is eligible for EU subsidies despite the Commission’s warning, said Tuesday it had sent clarifications to the Commission this week.

Agrofert spokesperson Pavel Heřmanský said neither Agrofert nor any of its subsidiaries were involved in the communication between the Commission and Czech authorities.

“The cited letter from DG AGRI expresses the opinion of one of the European Commission’s departments. It does not constitute an official position of the European Commission,” said Heřmanský in a statement, adding that “only the Court of Justice of the European Union can provide a binding interpretation of European Union law.”

He added: “We remain convinced that we have received and continue to receive subsidies in compliance with both Czech and European law.”

The European Commission’s bid to make the EU’s billions more responsive to the unknown crises of the future might also make them more prone to misuse, the EU’s top spending watchdog warned.

European Court of Auditors President Tony Murphy said key pillars of the Commission’s plan to overhaul the EU’s long-term budget would muddy the view for those in charge of making sure public money is spent as intended.

“It’s more difficult for us to follow the money,” Murphy said. “You’re saying to the member state, here’s a whole lot of money, and you make sure everything is okay. It’s sort of a self-policing.”

The warning comes as EU leaders continue fighting over the price tag for the EU’s post-2027 budget in Brussels this week — and as the auditors document an increase in misspending of taxpayer funds.

Yet separate from the budget’s bottom line is the debate over how that money gets divided. As a spending cycle marked by the pandemic, wars and climate-fueled disruption comes to a close, the Commission wants to make the next seven-year budget more agile by assigning about half of it — almost a trillion euros over seven years — to a single pot of money that countries can spend on objectives ranging from migration to agriculture and regional development.

Those agriculture and regional development funds — often delivered in the form of subsidies to farms and local projects — have long been vulnerable to fraud and misuse.

According to Murphy, giving capitals more leeway to shift spending would make spending even harder to track.

“There will be some flexibility, but at what cost?” he said in an interview. More of the oversight will depend on the checks each country has already put in place.

As it stands, misspending of the EU budget was on the rise last year, with errors affecting transactions for an estimated €5 billion according to the ECA’s latest report.

In the next EU budget, it might not be possible to even estimate such a number, Murphy warned, as each country’s auditors have different roles and ways of doing things. His head of cabinet, Wolfgang Stolz, added during the interview: “Year after year we have found that the work of these auditing authorities is not fully reliable.”

In a statement, the Commission defended its proposal, underlining that “key principles” of the current control system will remain in place. National authorities are “well-functioning,” the statement contended, but added that the Commission would maintain the right to ask capitals to “amend the plan or introduce correction mechanisms if needed.”

‘Mixed bag’

One of the Commission’s proposed innovations is putting the Common Agricultural Policy — historically a standalone budget line — into a behemoth umbrella fund known as the National and Regional Partnership Plans.

Murphy stressed that he’s not advocating for any model over the other. But as EU money increasingly merges with national budgets, it will be harder for Brussels to monitor where its money actually goes. The CAP is simpler to audit when “it’s not mixed up in this mixed bag,” Murphy said.

Headlines about farm subsidies paying for fake pastures in Greece and cash meant to support rural tourism in Slovakia instead going to luxury villas for the rich offer lurid illustrations of the challenge of policing these funds under the current system.

And the model for the new spending system — the EU’s post-Covid recovery fund — doesn’t bode well, Murphy said. While it became easier for countries to direct the funds where they were needed, the spending also became more opaque. The new national plans were designed using the same blueprint.

Under the current budget system, the ECA can physically visit a farm that receives EU funds. However, under the Covid recovery fund, the EU publishes only the top 100 beneficiaries each year.

“It’s not very transparent. I mean, where is the EU money actually ending up? That’s what matters,” Murphy said. “You have a fund where there are different policy areas with completely different objectives and timeframes, different delivery mechanisms and less predictability.”