BRUSSELS, Oct 24: The French and German leaders agreed on Thursday to cap the European Union’s agricultural spending from 2007, raising hopes of agreement at an EU summit on financing the bloc’s historic enlargement.

“France and Germany are committed to EU enlargement and are working together to seize this historic chance to further the EU’s development in a peaceful way,” German Chancellor Gerhard Schroeder told reporters after meeting his French counterpart Jacques Chirac in Brussels.

“From 2007 the agricultural spending of the EU will be capped, taking into account inflation,” Schroeder said, adding that the deal would be in effect until 2013, when another six-year EU budget period starts.

His comments were confirmed by Chirac.

The two leaders had met in a Brussels hotel, deeply divided ahead of a wider EU summit which aims to set terms for financing the 15-nation bloc’s enlargement to eastern Europe and the Mediterranean.

“We are conscious that this summit and the (December EU) summit in Copenhagen are historic moments.

The two-day summit in Brussels was scheduled to start with a dinner of heads of government on Thursday and finish by Friday night but diplomats have warned that wrangling over funding for new EU candidate states, 10 of whom are due to join the bloc in 2004, will go down to the wire.

France, the biggest beneficiary of the EU’s much-contested Common Agriculture Policy (CAP), has been backing proposals by the European Commission, the EU’s executive arm, for the extension of the farm subsidies system to the new candidate states.

Germany has insisted that direct aid to farmers in the new member states must be linked to a reduction in the cost of the CAP, which eats up nearly half the current EU annual budget of 95 billion euros (dollars).

On the eve of the summit, signs had emerged of some French flexibility, with diplomats saying Chirac could agree to a “ceiling” on farm aid but remained obstinately opposed to their phasing out.—AFP