A top European watchdog Thursday warned Lithuania that Brussels may freeze funds aimed at helping it decommission a Soviet-era nuclear reactor unless the Baltic state improves its management.

Michael Theurer, head of the European Parliament's committee on budgetary control, said the European Commission had set Vilnius a July 17 deadline for a shake-up.

He warned that the European Union's executive could "put into place the question of freezing of European funds if the management structure is not improved."

"That is the ultima ratio which we understand, and we back the Commission position" said Mr. Theurer, who was heading a special delegation during a three-day visit to Lithuania.

A pledge to shut the Soviet-era facility was one of the conditions for Lithuania 's admission to the EU in 2004. It closed its only nuclear power plant, located near Ignalina in the country's northeast in 2009.

In February, a damning report by the European Court of Auditors said "major infrastructure projects face delays and cost-overruns" in Lithuania .

Lithuania has received almost 1.37 billion euros ($1.68 billion) as part of an EU funding deal to support the decommissioning but Mr. Theurer noted that less than half of this sum has been used so far.

In a new budget, starting in 2014, the European Commission has offered Lithuania EUR210 million in decommissioning funds but Vilnius said it needed over EUR700 million.

"The talk about new money is not easy if available funds amounting up to EUR500 billion are not used effectively now," Theurer warned.

The Lithuanian government has admitted delays in the project but insists the responsibility lies with the main contractor, Russian-owned German company Nukem Technologies.

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