War in Europe: Nato agrees huge aid deal for Balkans

THE BALKAN states around Kosovo will be offered formal links with Nato and the European Union as part of a multi-million-pound political and economic settlement designed to shore up their wavering support for military action in the region.

Nato, holding its 50th anniversary summit here, is rushing through an emergency package of aid for the countries bordering Yugoslavia, amid signs of growing frustration among their governments that they are bearing the brunt of the humanitarian crisis.

In a meeting here today, Nato and the EU will present a blueprint for future co-operation to representatives of the "frontline states" - Macedonia, Albania, Romania, Bulgaria, Croatia, Bosnia and Slovenia - whose co-operation would be crucial if ground troops are ever sent in.

The plan is also evidence of growing concern in the alliance that the conflict will escalate and spill over into other countries. One British source said the region was now a "tinder box" which needed a long-term political solution. Germany plans to host a conference on the future of the Balkans next month.

Following his visit to the region, Paddy Ashdown, the Liberal Democrat leader, privately warned Tony Blair that he detected growing anger in Macedonia that its territory was "being used" by the alliance to house refugees without anything substantial in return. Almost 500,000 people have poured into Macedonia and Albania since the conflict started.

Bulgaria and Romania have granted Nato air rights to attack targets in Yugoslavia, and Slovenia has said it would allow Nato forces to cross its borders in the event of a ground invasion. However, Western diplomats believe that more must be done by the alliance to "tie in" the countries around Kosovo.

Britain has drafted proposals for a fast-track system to bring south- eastern European countries closer to Nato. Robin Cook, the Foreign Secretary, raised the plan for a new consultative committee involving the seven states at a meeting with his counterparts on Friday night.

The Foreign Office also circulated a paper to other European countries last week proposing that they should be brought into "formal dialogue" with the EU. Although this stops far short of offering EU membership, it is an important gesture of goodwill. "This is the first stage of moving towards membership," one source said.

Millions of pounds of EU money will be poured into the region. Around pounds 600m has already been set aside by Brussels, with substantial additional sums expected to be approved shortly. The Clinton administration has also asked Congress to approve a $600m (pounds 375m) package. The EU package is in addition to short-term humanitarian aid to the Balkans. Britain proposes that the region's states be encouraged to introduce a free-trade area to increase pressure on President Milosevic by undermining the Serbian economy.

Foreign Office sources said the package would emphasise to Mr Milosevic that Nato is fully behind the frontline states and will not tolerate military action against them. The Serbs have already attacked across the border into Albania. Ministers also hope that it will leave Mr Milosevic more isolated in the region and encourage discontent among the Serbian people.

Mr Cook will say today that the international community must do more "to build a south-eastern Europe free from the violence of instability of the past", that there needs to be "a new level of international engagement in building security, prosperity and civil society".