By Justyna Pawlak
BRUSSELS (Reuters) - The European Commission is likely to punish Croatia next week in a row over extradition rules that has marred the former Yugoslav state's first months as a member of the European Union and may endanger EU aid for border control improvements.
The Adriatic state's entry to the EU in July was celebrated as a mark of recovery from years of war during the bloody collapse of Yugoslavia.
But Croatia has quickly fallen into disagreement with its new peers over amendments to its extradition laws, made just a few days before it joined the group, which effectively ensured protection of veterans from Croatia's 1991-95 independence war from facing inquiries elsewhere in the EU.
Zagreb will also likely fall foul of EU budget rules this year thanks to a protracted recession.
The European Commission, which acts as the bloc's executive, is expected to invoke an article in Croatia's accession treaty that allows it to impose punitive measures if EU rules are broken, the so-called safeguard clause.
"Patience has run out. We will likely move to trigger the safeguard clause," one senior Commission official told Reuters, speaking on condition of anonymity. He said this would likely happen at the regular meeting of EU commissioners next week.
The Zagreb government pledged last month to apply European rules in full in an effort to avoid sanctions.
But the EU's top justice official, Viviane Reding, said in a letter to the country's Justice Minister Ornate Miljenic dated September 4 that its promise to change how the European Arrest Warrant will be applied next year was not enough.
She said the lack of compliance could lead to delays in the country joining the bloc's Schengen passport-free travel zone, which Zagreb has said is a priority.
Two diplomats told Reuters specifically on this score, the Commission may decide to target funds given to Croatia to improve border controls to prepare for entry to the zone.
Croatia's opposition HDZ party, which ruled the country in the 1990s and between 2004-2011, has accused Zagreb's leftist-led government of tweaking EU rules to protect former Croatian intelligence chief Josip Perkovic.
The official had worked for communist Yugoslavia's secret service, the UDBA, and led intelligence services after Croatia became independent, and now faces charges in Germany over the 1983 murder of a Yugoslav dissident in Bavaria.
Prime Minister Zoran Milanovic has denied any connection with the German case and says Croatia only sought to exercise the same privileges as its EU peers.
EU members could request exemptions from the European Arrest Warrant before 2002, but the Commission says that only applies to states that were in the bloc at the time. Croatia could have asked for exemptions when it was negotiating its entry to the European Union, but did not do so.