By Paul Taylor

BRUSSELS (Reuters) - The European Commission issued a scathing indictment of corruption in Bulgaria on Wednesday, suspending aid worth hundreds of millions of euros (dollars) and barring two key payments agencies from receiving EU funds.

A report on the management of European Union funds by the latest and poorest EU member said the fight against high-level corruption and organised crime was not producing results and the Commission had to act to protect taxpayers' money.

"Therefore, the Commission has taken the decision today to formalise this (aid) suspension and withdraw the accreditation for two government agencies in charge of managing these pre-accession funds," chief Commission spokesman Johannes Laitenberger told a news conference.

The two reports on Bulgaria -- one on funds and the other on judicial reform -- were the harshest criticism ever levelled by Brussels at a member state. A report on fellow newcomer Romania, which also joined in January 2007, pointed to political and judicial obstruction of corruption trials but avoided sanctions.

Commission President Jose Manuel Barroso called them "a reality check -- they show that both the Bulgarian and Romanian governments need to step up their efforts on judicial reform, corruption and in the case of Bulgaria organised crime".

Bulgarian Prime Minister Sergei Stanishev promised action to remedy the shortcomings. "There is a discrepancy between the political will which is a fact and the achievement of concrete results," he told a news conference.

Analysts said the Commission was trying to set an example to other Balkan candidate countries and to reassure voters disenchanted with the 27-nation bloc's eastward enlargement.

But the EU executive softened the blow at the last minute by toning down the toughest wording of earlier drafts and omitting a threat to delay Bulgaria's entry into the euro single currency zone and the Schengen area of passport-free travel.