EU agrees to give more aid to world's poorest nations

The European Union overcame its long-running divisions last night to agree a substantial increase in development aid for the world's poorest nations.

On the eve of their heads of government meeting in Barcelona, the 15 member states decided binding targets that will see their annual development aid rise by at least €4bn (£2.48bn) a year by 2006.

The move, which came after Italy and Germany dropped their objections, was welcomed by the Chancellor, Gordon Brown, who has argued for an increase in spending in the Third World. The decision was a "triumph" for Mr Brown, a Treasury spokeswoman said.

As leaders gathered at the start of the summit on economic reform, Romano Prodi, the European Commission president, said the agreement "shows that Europe is not complacent about being the world's No 1 aid donor". The compromise binds those countries with the lowest rates of aid to commit themselves to reach at least 0.33 per cent of gross national product by 2006. To bring the average up to 0.39 per cent, the more generous nations will maintain or increase spending.

Germany had been the main critic of the push for increased aid, arguing that it could not boost spending to poor countries when it had come under fire from the European Commission for high public spending levels.

Although in absolute terms German spending on development is high, as a proportion of gross national product it was only 0.27 per cent in 2000.

Italy was lowest with just 0.13 per cent and the most generous was Denmark at 1.06 per cent. In the same year the UK came close to the average at 0.32 per cent. The EU and its 15 member states are the world's biggest aid donors.

Also at the summit, France was mounting a last-ditch effort to water down EU plans to break the grip of its energy monopolies, as leaders faced the prospect of bitter clashes over economic reform.

The status of Electricité de France is particularly sensitive. It has used its monopoly of the domestic market to help expand into other EU nations, including the UK. By contrast British firms are barred from the French market.

EU leaders know that the credibility of their ambitious programme to revitalise the European economy is on the line. Freeing the €250bn a year gas and electricity markets is one of the key objectives and is seen as a test of the strength of those backing change, particularly Tony Blair, and the Spanish Prime Minister, Jose Maria Aznar.

Diplomats expect a carefully crafted compromise that will set out a timetable for opening up the energy market to commercial users, but not for the domestic market.

Mass protests are planned by anti-globalisation demonstrators today and security is tight. Spanish police along the border with France seized mallets, baseball bats, axes, home-made rocket launchers and lengths of cord filled with lead from protest groups.