The European Commission was set Wednesday to confirm that Romania and Bulgaria are on track to join the European Union in 2007, although Croatia will have to wait, according to leaked documents.

Romania will welcome the report in particular because it confers "functioning market economy" status on the Balkan state, which along with its Balkan neighbour Bulgaria was left out of the EU's expansion in May this year.

The two countries "will be able to fulfill all the criteria" for joining the union in January 2007 and the accession treaty is likely to be signed early next year, according to the document cited by a diplomatic source here.

But the report also recommends a "safeguard clause" that could delay entry of either Romania or Bulgaria by a year if their economic and administrative reforms falter.

The report on the Balkan neighbours, the latest in the EU executive's annual declarations on candidate states, was being published along with another on Turkey expected to say Ankara is ready to begin talks on joining the EU.

The reports on Sofia and Bucharest's hopes are not without criticism. In Romania it laments that "corruption remains a serious and widespread problem which affects almost all aspects of society."

Cases of serious physical attacks against journalists have increased, it adds, and Romania "remains a country of origin, transit and destination for victims of trafficking in humain beings."

Meanwhile it says that Bulgaria "should... enhance its progress in the fight against corruption," adding: "Efforts need to be fostered with regard to improving the situation of the Roma (gypsy) community."

Bulgaria was last year deemed to have a functioning market economy, a benchmark set by the EU for membership.

Bulgaria closed its EU accession negotiations in June, but Romania has still to complete some areas of its entry dossier, notably in environmental, competition and legal fields.

Romanian President Ion Iliescu said Wednesday he was "optimistic" that his country will fulfill all the requirements to join the union on January 1, 2007.

The two neighbouring countries dragged their feet in implementing reforms after the collapse of communism in 1989 and were excluded from the wave of mostly central and eastern European states that joined the EU in May, boosting its members to 25 countries.

But Croatia, which wants to join at the same time as the other two countries, is not given a start date for accession talks in the European Commission report, the source said.

And Zagreb should be warned that its membership talks could be suspended if it does not continue to improve its democratic and human rights standards, the report recommends.

Croatia obtained official EU candidate status in June and hopes to start accession talks early next year.