The Objective One programme aims to regenerate the valleys

The Welsh European Funding Office (Wefo), which has been running the �1.2bn Objective One European aid programme at arm's length from the Welsh assembly, will in future be run directly by ministers and civil servants.

Opposition parties have accused the Welsh Assembly Government of making a U-turn.

Wefo was set up three years ago to process Objective One grant applications.

Objective One aid is grant money from the European Union designed to revitalise the poorest areas of Wales.

The programme is not being delivered properly and money is being wasted Jonathan Evans MEP

But Wefo's chief executive John Clarke is taking early retirement and the body will now be run directly by the assembly's economic development minister Andrew Davies and his civil servants.

Opposition parties have called the move an admission of failure of the assembly government's Objective One programme.

An assembly government spokeswoman confirmed that Wefo was being brought under the direct control of the assembly.

'Out of proportion'

But the spokeswoman added that the change was being made to give the assembly government greater strategic control over the programme.

She denied the programme was failing and said that Objective One money would not be sent back to Europe.

Labour AM Christine Chapman, who is chair of the Objective One monitoring committee, which used to oversee Wefo, said the move was "welcome".

She said: "I'm concerned at the way this story has been blown out of all proportion.

You have people...paying the price for policy decisions that were made three or four years ago Dylan Jones Evans, University of Wales

"This is a welcome move - it's about improving Objective One."

But Elin Jones AM, Plaid Cymru's shadow economic development minister, demanded that Andrew Davies appear before a special meeting of the assembly's economic development committee to explain the decision.

She said: "It is completely unacceptable that Andrew Davies makes a decision of this importance days after the assembly recess began.

"By abolishing Wefo, the Labour Government in Cardiff is admitting that it has failed to ensure the effective running of European structural funds in Wales.

Swansea's new maritime museum has received Objective One money

"My concern now is that it is far from clear how the administration of the programme is to be managed after the abolition of Wefo."

Conservative Welsh MEP Jonathan Evans added: "The programme is not being delivered properly and money is being wasted."

Dylan Jones Evans, professor of enterprise at the University of Wales in Bangor, said Wefo was "paying the price" for decisions made in the early days of the Objective One project.

"Wefo was set up quickly," he said.

"It was the assembly that put in the system and structures that Wefo had to administer.