In a surprise move, German chancellor Gerhard Schroder and French president Jacques Chirac last night [Thursday] reached agreement on limiting EU agricultural subsidies after 2006.

The deal is believed to freeze future agricultural spending at current levels, taking inflation into account, reports FT.com. It should now ease the path for all 15 EU countries to agree a common line on how to finance plans to take in ten new members by 2004. These include Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia.

Agricultural support accounts for nearly half of the EU's €92bn (US$89.8bn) annual budget. Member states have had trouble reaching agreement on how much direct farm aid should be paid to farmers in the new member states.

Schroder said: "We will both take the position that phasing in [of direct farm aid] to acceding countries will start in 2004. From 2007, spending will be capped and will not increase beyond the rate of inflation up to 2013."

Chirac said it was "our joint will to control expenditure in all areas".

Italian farm minister Giovanni Alemanno expressed concern about the Franco-German deal on phasing in payments to new members, as it was a decision reached by just two of the EU's 15 member states.

UK foreign secretary Jack Straw gave a lukewarm response to the deal on farm spending, saying it fell short of the wholesale reform for the Common Agricultural Policy for which some member states and the European Commission had been striving.