By Robin Emmott
BRUSSELS (Reuters) - The European Union is set to cut up to 175 million euros for Turkey in 2018 that are linked to Ankara's stalled bid to join the bloc and could block some 3.5 billion euros in development loans earmarked for the country, lawmakers and diplomats said.
In a symbolic stand against deteriorating human rights in Turkey, the 2018 cuts are likely to be the start of a longer-term reduction of pre-accession aid that is meant to help EU candidate countries prepare for membership.
"As long as Turkey is not respecting freedom of speech, human rights, and is drifting further away from European democratic standards, we cannot finance such a regime with EU funds," said Siegfried Muresan, the European Parliament's chief budget negotiator.
Two EU diplomats said EU governments had agreed with the European Parliament this week to withdraw 105 million euros that would have gone to help finance political reforms in Turkey, as well as holding back another 70 million euros.
Ankara can still access the 70 million euros if it improves its rights record, Muresan said.
Signaling the slow collapse of Turkey's decades-long attempt to join the European Union, the cuts are deeper than an initial proposal to reduce funds by 80 million euros next year.
They follow a call for action by German Chancellor Angela Merkel during her re-election campaign, who has described Turkish behavior on human rights as "unacceptable".
Aside from money that the EU gives Turkey as part of its 2016 migration deal, Ankara was set to receive 4.4 billion euros from the EU between 2014 and 2020.
Some EU governments now want frozen funds to go to non-governmental groups in Turkey, not to Ankara.
Next week, EU governments and lawmakers are set to decide whether Ankara should also lose access to some 3.5 billion euros of European Investment Bank loans that have been earmarked for Turkey until 2020 and that have yet to be assigned.
They are now likely to be made available to Ukraine and other former Soviet republics, diplomats said.
Merkel has said the rule of law in Turkey is "moving in the wrong direction", a reference to the large-scale purge that President Tayyip Erdogan has carried out following a failed coup attempt in July 2016.
While the EU condemned the coup attempt, the scope of Erdogan's response, his detention of U.S. and European citizens including dual nationals, and his jibes at Germany for what he has called "Nazi-like" behavior have soured EU-Turkey ties.
Erdogan says the purges across society are necessary to maintain stability in a NATO country bordering Iraq and Syria.
Launched in 2015 after decades in which Ankara sought to formally start an EU membership bid, Turkey's EU membership negotiations were always sensitive for France and Germany because of its status as a large, mainly Muslim country.
They are not officially frozen, despite calls from Austria to formally scrap Turkey's EU membership program. That is in part because the EU relies on Ankara to take in Syrian refugees in return for billions of euros of aid.
But a majority of EU countries, led by Germany and the Netherlands, say it no longer makes sense to fund political reforms in Turkey when formal EU membership talks have not taken place since last year.
(Reporting by Robin Emmott; Editing by Catherine Evans)