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

If not, he warned, 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 Theurer, who was heading a special delegation during a three-day visit to Lithuania.

At the end of 2009, Lithuania closed its only nuclear power plant, located near Ignalina in the country's northeast.

A pledge to shut the Soviet-era facility was one of the conditions for Lithuania's admission to the EU in 2004.

In February, a damning report by the European Court of Auditors said "major infrastructure projects face delays and cost-overruns" in Lithuania, as well as Bulgaria and Slovakia who also committed to close reactors as part of their EU accession negotiations.

Under a previous 2.85-billion-euro EU funding deal for the three countries running until 2013, Lithuania's share has been almost 1.37 billion euros, and Theurer pointed that less than half of this sum was used so far.

In a new budget, starting 2014, the European Commission offered Lithuania 210 million euros in decommissioning funds but Vilnius said it needed over 700 million euros.

"The talk about new money is not easy if available funds amounting up to 500 billion euros are not used effectively now," Theurer warned.

The Lithuanian government has admitted delays in the project but insisted the responsibility falls on the main contractor, Russian-owned German company Nukem Technologies.