(Repeat)
* Minister's review of prosecutor general near the end
* Government changes hiring rules for prosecutors via decree
* Diplomats say legal changes interfere with judicial independence
* Ruling party says changes aim to correct abuses
By Luiza Ilie
BUCHAREST, Oct 19 (Reuters) - A power struggle between Romania's government and judiciary is reaching a tipping point that risks driving a new wedge between the European Union and its eastern members over democratic standards.
Justice Minister Tudorel Toader has said he will soon decide the future of the prosecutor general, the last major figure in an anti-corruption drive which has won praise from Brussels for exposing high-level graft, including the theft of EU funds.
Augustin Lazar oversees around 2,500 prosecutors, including anti-organised crime unit DIICOT and anti-corruption unit DNA.
If Toader decides to trigger Lazar's dismissal, it will mark the end of an era for Romania's prosecutors. The head of the DNA has already been fired and DIICOT leader's mandate has expired.
The government says the units have ruined innocent lives.
Anti-corruption prosecutors have secured almost 5,000 convictions over the past five years, including 27 lawmakers and 83 mayors across parties, as well as ministers, county council heads, state firm managers and magistrates.
Among them is Liviu Dragnea, leader of the ruling Social Democrats, who was barred from becoming prime minister by a conviction in the first of three investigations against him. He denies all wrongdoing and says he is the victim of a political witch-hunt by the judiciary.
In recent months, his party has launched a slew of bills to overhaul criminal law and procedures to raise the burden of proof. It has also set up a unit to investigate judges and prosecutors for possible crimes and aims to reorganise judges' panels.
European diplomats, who are seeking sanctions against fellow east European states Poland and Hungary for flouting democratic values, are concerned Romania is following suit.
"MOVING BACKWARDS"
"There is now the real risk that things are moving backwards in a way that would be damaging not only for Romanian democracy but for the place that it has built as an EU member state," the EU executive's First Vice-President Frans Timmermans said at a meeting of the European Parliament this month.
"The procedure that has been started recently in relation to the general prosecutor raises similarly worrying concerns."
The Venice Commission, the Council of Europe's advisory body on constitutional matters, said on Friday that changes made to Romania's criminal code and procedures "seriously weaken the effectiveness of its criminal justice system to fight corruption offences, violent crimes and organised criminality".
Any punitive measures against Romania similar to those the EU is seeking for Hungary and Poland will depend on the outcome of the wider legal changes the Social Democrats have initiated, including in the criminal code.
On Monday, the government tightened hiring criteria for DNA and DIICOT prosecutors via an emergency decree; as a result, over 40 of those prosecutors will be reassigned to other work. It said this was to address the Venice Commission's concerns.
Dragnea and senior party members say they aim to curb abuses by prosecutors and secret services, invoking the spectre of a "parallel state" that illegally wiretaps them.
DNA chief Laura Codruta Kovesi lost her job in July after an assessment by the justice minister similar to the one Lazar is undergoing now, despite resistance from the judicial watchdog and the president.
Other prosecutors and judges have had inspectors in their offices looking for flaws in their work.
"There is a tactic of making examples out of high profile legal professionals," one anti-corruption prosecutor told Reuters on condition of anonymity to protect pending cases.
"They're trying to show what happens if you don't behave. And it is working. Some people in the judiciary are starting to think, why I am fighting this?"
Minister Toader triggered the evaluation of Lazar, who oversees the prosecution service, or public ministry, in late August, saying the decision did not come out of the blue.
"Over time, I have noticed how the public ministry has veered away from its constitutional role of guaranteeing citizens’ rights and liberties," he said. "As before (with Kovesi), I will make a radiograph of the prosecutor general’s management and I will reach a conclusion."
The minister told private television station Antena3 earlier this week his conclusion was days away.
Lazar, who was appointed three years ago and has accused the government of trying to politicise the judiciary, said prosecutors' work was transparent and he did not fear being dismissed.
"It is unfortunately a very sensitive time for the Romanian judiciary and rule of law," he told a conference after the minister's announcement, the only time he addressed the issue.
"It's a context in which manipulating public opinion is often used as an instrument to destabilise prosecutors' work."
The prosecutor general is in charge of requests to lift the immunity of lawmakers for investigations and has a vote on the country's judicial watchdog.
Some critics have said he has not been aggressive enough in cleaning up the ranks of corrupt or inefficient colleagues, but many prosecutors admire him for standing up for them.
DNA statements show the bulk of its anti-corruption cases concern public works contracts given to firms which courts later found to be paying bribes; many were overpriced and some payments, including with EU funds, were made for fictitious works.
Timmermans said any changes that would weaken oversight of how EU taxpayers' money was spent in Romania "will trigger an immediate response from the Commission."
Investors' associations have repeatedly warned that corruption is a strong deterrent for business.
Dragnea, who is also lower house speaker, was given a two-year suspended sentence in a vote rigging case and also sentenced to three and a half years in jail for helping keep two party employees on the payroll of the state child protection agency. He has appealed and is due in court on Nov 5.
He is also under investigation in a third case on suspicion of forming a criminal group to siphon off cash from state projects, some of them EU-funded, charges he denies.
CHECKS AND BALANCES
Romania's centrist president was forced to sign the Social Democrats' overhaul of the judiciary into law this month after he used up his chances to object. It removes his veto rights on appointing top prosecutors, one of the key checks and balances.
Toader's nominee to replace Kovesi at the head of anti-corruption unit DNA has raised concerns she might be soft on high-level crime.
In August, riot police fired tear gas into the crowd at an anti-government rally and beat protesters holding their hands up.
An existing judicial inspectorate, whose chief Toader has kept on after his mandate expired, has been investigating magistrates at a rapid pace. Many of those probed have criticized the legislative changes.
U.S. ambassador Hans Klemm told law students this month the judicial overhaul "creates greater opportunities to coerce and punish troublesome magistrates."
"Cloaked in the mantle of concern for due process and human rights, some of these changes are a clear attempt to protect vested interests from an independent judiciary," he said.
The ruling party does not always succeed. This month, the Constitutional Court struck down most of alterations to criminal procedures that were challenged and which would have raised the burden of proof on all criminal investigations.
The Court will discuss challenges brought against proposed changes to the criminal code on Oct. 24.
The Social Democrats have said their legal initiatives aim to align legislation with EU norms and address abuses, citing acquittals by higher courts, although these are rare, and corruption investigations against some prosecutors.
Dragnea has also said that Romania's Secret Service (SRI), which has been gathering wiretap evidence for prosecutors based on court warrants, has been abusing its powers, faking evidence and illegally intercepting "millions of Romanians."
He said either parliament or government should pass a bill to retroactively cancel wiretap evidence. That would jeopardise hundreds of verdicts ranging from corruption to human trafficking and potentially Dragnea's cases as well.
DNA said that just over 36,000 people, not millions, have been wire-tapped since 2005.
"When the dust settles," the anti-corruption prosecutor said, "it will take years to figure out how these laws were changed and what is left." (Reporting by Luiza Ilie; editing by Philippa Fletcher)
