BRUSSELS —
As European Union leaders deliberated over their 1 trillion-euro ($1.1 trillion) budget Thursday, lawmakers were deeply concerned about potential conflicts of interest that could see hundreds of millions of euros in funds granted to companies linked to some of the very people deciding how the money should be spent.

One high-profile case concerns Czech Prime Minister Andrej Babis. A leaked EU audit last year concluded that the populist billionaire might have had a conflict of interest over EU subsidies involving his former business empire. More than 100 million euros could be involved, according to multiple reports about the audit.

Babis denies any wrongdoing and has accused the EU of trying to destabilize the Czech Republic.

But EU concerns are not just confined to the Czech Republic. The business interests of leaders in Hungary, Bulgaria, Romania and possibly others are also raising eyebrows in Brussels, where European institutions lack the tools and law to effectively combat the problem.

The allegations of possible fraud eat away at public confidence in the European project at a time when far-right and anti-migrant parties are gaining political traction and just after one of Europe's biggest member countries, the United Kingdom, left the world's biggest trading bloc.

The underlying question is how to prevent the people who decide how much tax payers’ money gets spent on agriculture subsidies, infrastructure projects or regional development aid from channeling that cash into their business interests.

After talks with the leaders as Thursday's summit opened, European Parliament President David Sassoli expressed surprise that the latest budget proposal would see funding cuts to Europe's public administration.

“There is something bizarre about this,” Sassoli told reporters. “We want to have proper checks on resources. How can you do that if you have cuts, if you have this kind of reduction?”

In a resolution on the eve of the extraordinary budget summit, the European Parliament’s spending watchdog, the Budgetary Control Committee, said it is “deeply worried by recent reports about agricultural funds allegedly benefiting oligarchic structures.”

“Given the widespread problems of conflicts of interest in the distribution of (the) Union’s agricultural funds, it is undesirable that members of the European Council, agricultural ministers, functionaries, or their family members should be taking decisions on income support,” it said.

The committee urged the EU’s executive Commission to propose “a maximum amount of direct payment per natural person as beneficial owner of one or several companies” in any one seven-year budget period.

The lawmakers appealed for “guidelines for the avoidance of conflicts of interest of high-profile politicians,” and they asked the European Council — the institution representing the 27 EU member countries — “to adopt common ethical standards” on conflicts of interest.

“It is unacceptable that individual beneficiaries can receive up to three-digit million sums,” Monika Hohlmeier, the chair of the committee, said after lawmakers examined a 2018 EU budget Wednesday. She called “for EU-wide rules to avoid conflicts of interests of high-level politicians and emphasize the need for common ethical standards.”

No leader was publicly mentioned by name by the committee, which has no oversight over national budgets or even the budget of the European Council, and whose membershave discussed the leaked audit behind closed doors and prefer to keep a low profile.

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Separately, the lawmakers are also concerned that criminal gangs are getting their hands on EU money.

Italian authorities launched a crackdown last month on parts of the Sicilian Mafia working in cahoots with public officials to defraud the EU of more than 10 million euros ($11 million) in agricultural aid. They said mafiosi used violent threats and extortion to seize ownership of lands eligible for EU aid.

But national authorities on their own are virtually powerless to act when it comes to potential conflicts of interest at the EU level. To really combat the problem, the EU's executive commission would have to work to bolster the rules.

In the Czech Republic, meanwhile, a new wave of protests against Babis is expected next week.

They follow two major rallies last year when a total of more than half a million people demanded that Babis step down, in the biggest such demonstrations in the country since the 1989 anti-communist Velvet Revolution.

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Karel Janicek in Prague and Raf Casert in Brussels contributed to this report.