The European Union sealed a historic deal to admit 10 mostly former communist East European states yesterday and Turkey grudgingly agreed to wait two years before the EU decides whether it is fit to start entry talks.

Turkey lifted its obstruction of a long-delayed agreement for the US-led Nato alliance to assist the EU's embryonic military crisis management force, clearing the way for Europe to run its first peacekeeping operations next year in the Balkans.

But an EU dream outcome was marred by a setback on Cyprus, one of the 10 candidates that will join the EU on May 1, 2004.

Greek and Turkish Cypriot negotiators, meeting on the sidelines of the Copenhagen summit, failed to reach a peace deal to end 27 years of division on the Mediterranean island.

The EU agreed to admit a divided Cyprus if necessary.

Turkey acknowledged the failure of its fight for a 2003 date for accession talks from the EU, despite lobbying by President George W. Bush on behalf of a strategic Muslim Nato ally vital for any US military action in Iraq.

Turkish leader Tayyip Erdogan pledged to work hard to meet the wealthy bloc's strict standards on human rights and democracy to ensure talks start in 2004.

Polish Prime Minister Leszek Miller, who fought a tough battle to the end for more generous terms, waxed lyrical when the deal was done.

"Poland has made a great historic step forward. We shake off the burden of Yalta," he said, referring to the 1945 division of Europe into Soviet and Western zones of influence after WW II.

"Our tough negotiations until the end has worked." The summit outcome means the EU land area rises by 23 per cent and population by 20 per cent to 450 million in 2004, but its gross domestic product will grow by only five per cent.

EU diplomats said the final enlargement deal meant the EU would spend 40.8 billion euros in the 10 new members in 2004-6, less than the bloc originally budgeted to spend on expansion back in 1999.

The countries that will be invited to join in May 2004 are Poland, Hungary, the Czech Republic, Slovakia, Slovenia, Estonia, Lithuania, Latvia, Cyprus and Malta. A summit draft statement backed Bulgaria and Romania's aim of entry in 2007.

Turkey's tone towards the EU softened during the day after an unexpected outburst of anger by Prime Minister Abdullah Gul in reaction to the 15 leaders' decision during the night to keep Ankara waiting until December 2004 for possible entry talks.

Gul accused the Europeans of discrimination and charged French President Jacques Chirac with blackmail and turning other Europeans against Ankara.

Angered by reports that the French leader had criticised blunt Turkish negotiating tactics, Gul was quoted as saying: "The real blackmail is what Chirac has done. I am very disappointed Chirac has influenced and directed the meeting."

But after meeting Chirac and German Chancellor Gerhard Schroeder, he sounded a gentler note, saying Turkey would "prove if it joins the EU that a Muslim country can be democratic and comfortable with the modern world."

Turkey is worried that Cyprus or another newcomer might block its path to a club it has tried to join since the 1960s.

Turkish EU membership arouses deep passions in Europe, with many voters concerned about letting a mainly Muslim state with a large and rapidly growing population and borders with Iran, Iraq and Syria, into the predominantly Christian EU club.

But the United States and Britain see it as vital to bring stability to the eastern Mediterranean and set an example of the rewards that successful Muslim democracies can reap.

Greek Cypriot Attorney General Alecos Markides said the United Nations mediator Alvaro de Soto had advised him it would be impossible to reach a deal at yesterday's summit to end the division of Cyprus.

It followed a 1974 Turkish invasion triggered by a Greek-inspired coup in Nicosia.

Turkish Cypriot leader Rauf Denktash, veteran leader of the breakaway Turkish Cypriot statelet which only Turkey recognises, told reporters in Ankara: "The European Union's interest is to delay Turkey and to take Cyprus, to possess Cyprus and to build something like a Christian fortress around Turkey."