By Oana Lungescu BBC correspondent in Brussels

A pro-EU cow sculpture in Bucharest: Romania is well on the way

The course of Bulgaria and Romania towards the European Union has always been marked by delays.

They started membership talks in 2000, two years later than their richer and more advanced neighbours from Central Europe.

In 2004, they were still marking time as the other ten EU hopefuls joined the bloc.

In April 2005 they finally signed a joint accession treaty, but now, just months before their planned accession date of January 1, 2007, they are likely to face another delay.

The European Commission is set to tell both countries they can join next year, provided they fulfil 10 more conditions - four for Romania, six for Bulgaria.

One EU official described the message as a "conditional yes".

Cautious approach

The EU does not want to penalise reformist governments in both countries by delaying the entry date.

But with growing public unease in Western Europe about further EU expansion, Bulgaria and Romania will be made to work even harder to get a definite answer. That will only come in the Commission's next report in the autumn.

The plight of Roma - many of them destitute - is also under scrutiny

The EU will leave itself enough time to trigger what officials call "the nuclear button" - the special clause in the accession treaty which allows for the postponement of EU entry to 2008.

Surprises cannot be ruled out. One is that Romania, for years the laggard of the Balkans, has overtaken Bulgaria in the key area of fighting corruption.

According to a draft of the report obtained by the BBC, Romania is conducting investigations against dozens of senior politicians, judges and public officials "at a speed comparable what that in any EU member states" and two senior figures have been indicted.

The report praises the reforms led by the justice minister and the chief anti-corruption prosecutor, but urges all the other state institutions to follow with "sustained efforts....so that the progress made becomes irreversible".

Romania still has four areas of serious concern to tackle - so-called red flags - but they are mainly technical.

One is setting up a computer system for tax and VAT collection able to connect to those in the rest of the EU.

The three others concern agriculture: fully operational payment agencies for EU farm aid; a system for animal registration needed for the payment of EU farm subsidies and maintaining proper veterinary standards; and proper facilities to collect and treat animal by-products needed to prevent mad cow disease.

Tackling corruption

Bulgaria's to-do list is longer and more sensitive.

The European Commission praises recent constitutional amendments reducing the scope of immunity of members of parliament and moves to launch high-level anti-corruption investigations. But its conclusion is stark: "Indictments, prosecutions, trials, convictions and dissuasive sentences remain rare in the fight against high-level corruption".

The report also raises serious concerns about Bulgaria's effectiveness in the fight against organised crime.

More than 100 mafia-style contract killings recorded in Bulgaria since 2001 have remained unpunished, prompting the European Commission to call for "tangible results in investigating and prosecuting organised crime networks".

We have to protect our citizens from arbitrary rulings EU official

Bulgaria also has to implement more efficiently and systematically the laws for the fight against fraud and corruption and better enforce rules against money-laundering.

Several of Bulgaria's "red flags" also concern agriculture - the animal registration mechanism and the lack of facilities for collection and treatment of animal by-products - while the sixth point calls for strengthened financial control over EU regional aid.

Funding threat

Both countries have to increase efforts in a dozen other areas, including tackling human trafficking, preventing ill-treatment of detainees, improving living conditions in psychiatric institutions and the social inclusion of the Roma minority.

The report also contains some serious warnings. If the two countries fail to set up the payment agencies for EU farm and regional aid which guarantee they can spend EU money properly, the European Commission says it "may take measures...to withhold payments".

A senior EU official told the BBC, "for pedagogical reasons, we have to spell out in clear terms there's a real risk they could lose billions". EU farm subsidies allocated to both countries between 2007-2013 amount to 8bn euros (�5.5bn; $10bn).

The European Commission also warns it could ban food exports from either country if food safety standards are not good enough "to ensure that no specified risk materials return to the food chain".

Similar warnings were issued to Poland and the other countries that joined the EU in 2004.

But for Bulgaria and Romania, entry terms are noticeably tougher.

The European Commission could establish a special monitoring mechanism "if implementation of reforms in the justice system is not sufficiently advanced in either country before accession, or if the fight against corruption in the judiciary has not yielded sufficient tangible results".

Special measures

It is unprecedented for EU states to be submitted to such close monitoring, amounting to a sort of second-class membership for Bulgaria and Romania.

The mechanism would be in place for three years, with annual reports by the Commission to EU governments and the European Parliament.

The potential penalty is that judgements or warrants issued by Bulgarian or Romanian courts or prosecutors would no longer be automatically recognised in the rest of Europe. "We have to protect our citizens from arbitrary rulings," an EU official told the BBC.

Immediately after they present the report to the European Parliament in Strasbourg on Tuesday, the president of the European Commission Jose Manuel Barroso and the enlargement commissioner Olli Rehn will travel to Romania and Bulgaria to explain the decision.

Despite the concerns, both countries are still likely to join next year. A decision to postpone their entry would have to be taken unanimously by EU governments, which is hard to imagine.

Sixteen out of the 25 EU countries have already ratified the accession treaty, although key players like Germany and France may wait until later in the year.

At their Brussels summit next month, EU leaders are likely to welcome progress in both countries, but the final decision to welcome them will probably be taken at an October summit in Finland.