Bulgaria's opposition called on Wednesday for early elections and slammed the Socialist-led government for its failure to fight rampant graft and stop fraud with European Union aid.

Brussels stripped Sofia on Tuesday of 220 million euros ($285.2 million) of funds and said Bulgaria might lose another 340 million euros if it fails to curb corrupt practices and political interference in funding processes by the end of 2009.

"In times of global financial crisis the government lost over 500 million euros. This is a harsh sentence for the bad governance of Bulgaria," said Ivan Kostov, leader of right-wing Democrats for Strong Bulgaria.

The move is unlikely to topple the ruling coalition, which has a large majority in parliament, but it underlines the challenge government parties will face in next year's election.

The failure to put corrupt officials behind bars has hit the popularity of the ruling parties and recent opinion polls show the Socialists would lose elections, if they were held now, to the rightist opposition GERB party.

Analysts say Bulgaria may lose more EU funds because deeper reforms are unlikely under the current cabinet, which has struggled to cut links between some officials and crime bosses.

The government says it has stepped up anti-fraud efforts and EU Funds Minister Meglena Plugchieva called Tuesday's EU decision "extremely unfair".

The Balkan country has launched several investigations into government officials and businessmen suspected of funds fraud, but has failed to convict a single senior official of graft and has jailed only one crime boss.

The amount of aid hit by Brussels' decision is part of the 11 billion euros of total EU funding which Bulgaria can expect to receive between 2007 and 2013 to improve its potholed roads and speed up economic development.

Economists and business leaders say the cuts are a particular blow because the economy depends heavily on foreign cash to fund modernisation and cover a growing external deficit.

Its growth has come at the expense of huge external imbalances, making Bulgaria one of the most vulnerable emerging economies at times of tight global liquidity.

"The signal is unambiguously negative (to investors). It shows the investment flows that the Bulgarian economy will continue to need over the coming year are likely to remain under pressure," said Ivailo Vesselinov of Dresdner Kleinwort.

The Confederation of Employers and Industrialists in Bulgaria said the government should outsource the management of EU funds to avoid losing more aid.

"I cannot imagine a worse Christmas gift for the Bulgarian economy. The politicians are responsible for losing the funds. But the price will be paid by businesses and households," said CEIBG Chairman Ivo Prokopiev.