The European Union looks set to approve accession talks for 10 new members after Germany and France reached a deal to curb farm spending from 2007.

The announcement came just ahead of a crucial EU summit in Brussels to discuss how to finance the bloc's expansion to include the candidate-countries.

Now I am confident that tomorrow the presidency will get a clear mandate to finalise accession negotiations with the candidate countries

Danish Prime Minister Anders Fogh

Germany, along with the United Kingdom, the Netherlands and Sweden, had been warning that the admission of new countries to the EU would be unaffordable without a cap on farming subsidies.

The formula has to be approved formally by all 15 EU states but Danish Prime Minister Anders Fogh, whose country holds the EU's rotating presidency, said it had been endorsed at a working dinner of the leaders on Thursday.

"Now I am confident that tomorrow the presidency will get a clear mandate to finalise accession negotiations with the candidate countries," he told reporters.

Differences settled

France, along with four other member states, had been defending the current system.

The deal now appears to be that agricultural subsidies will not increase beyond the rate of inflation until 2013.

The French and German leaders agreed a plan to phase in EU farm subsidies for the newcomers starting in 2004 for a three-year period.

"Starting in 2007, there will be a ceiling on farm spending until 2013," German Chancellor Gerhard Schroeder said.

"Nothing will change in the farm policy until 2006," he said. After that, farm spending would be frozen at the 2006 level, French President Jacques Chirac added.

Relief and dismay

The BBC's Europe correspondent Tim Franks says there will be general relief that the admission of new countries should now be able to go ahead.

But there will also be dismay in some quarters that the controversial system of subsidies may now be left untouched for the next 11 years, he says.

There should be no phasing in [of farm subsidies] without also phasing out

Dutch Prime Minister Jan-Peter Balkenende

The Dutch may be more hostile, as their mantra has that farm payments must not be phased in for candidate countries, without a end of the existing level of funding.

Dutch Prime Minister Jan-Peter Balkenende said earlier on Thursday that EU leaders must discuss reform of the European agriculture budget beyond 2006.

"There should be no phasing in without also phasing out. We have to talk about the longer-term consequences for the agricultural policy," he said.

Stumbling-block

EU Farm Commissioner Franz Fischler said on Thursday that his plans for far-reaching reform of agriculture policy needed to be debated fully rather than subjected to quick-fix minor adjustments.

"If there is no agreement at all about the phasing in of direct payments then the enlargement negotiations would come to a stop and I think this would be a very bad signal," he said ahead of the summit.

Earlier this week, EU foreign ministers meeting in Luxembourg failed to reach agreement on how to finance enlargement.

The ministers did not even discuss agricultural subsidies, after all sides indicated that their positions had not changed.