European Union leaders were on their way Friday to sealing a deal on the financial terms of admitting 10 new member states after Germany and France settled their dispute over farm spending.

Observers said the emerging deal appeared to be a triumph for French President Jacques Chirac, who had fought to extend the EU’s costly Common Agricultural Policy (CAP) after enlargement.

Concluding accession talks for the EU candidate countries are expected in December, and they are expected to join in 2004.

Though agricultural subsidies represent only 9.5 billion euro of the overall 42 billion euro proposed annual budget between 2004-2006 to fund the entry of the 10 new members, Germany wanted the aid to be linked to an overall reduction in the EU's agricultural budget.

CAP is a costly undertaking

Currently, the CAP consumes close to 50 percent of the EU's 95 billion euro annual budget.

Under the draft agreement being circulated on Friday, candidates would receive 25 percent of the direct farm aid received by EU farmers in 2004, increasing to 40 percent in 2007 and by 10 percent annually thereafter.

Many diplomats said they viewed the deal as a victory for France, which receives more CAP subsidies than any other country and which sought to avoid any changes before 2006. Germany, the Netherlands, Britain and Sweden had campaigned for stronger reforms to reduce farm spending.

"A step in the right direction"

“We are relieved. The Franco-German deal is a step in the right direction," a Polish diplomat told Reuters following the summit. “We hope that the EU will now adopt its position of financial issues so that our negotiations can proceed.”

A diplomat from another central European candidate said: “The devil is in detail. We are glad in a sense that our negotiations should not be blocked, but the EU financial offer could still not meet our expectations.”

The countries expected to join the EU in 2004 are Poland, Hungary, the Czech Republic, Slovakia, Slovenia, Lithuania, Latvia, Estonia, Cyprus and Malta.

The draft agreement didn’t list dates for Bulgaria and Romania to join, and did not set a date for entry talks with Turkey.

The plan underscored the historic aspects of EU enlargement in post-Cold War Europe. “The historic process launched in Copenhagen in 1993 to overcome the divisions throughout our continent is about to bear fruit,” the draft agreement declared.