France and Italy signed an accord to begin work on a high-speed rail link which will tunnel through the Alps and open up a freight route for Italian firms.

Italian Prime Minister Silvio Berlusconi said a bill of €12.5 billion for the link between Lyon and Turin would be shared equally by France and Italy, and that work was scheduled to begin in 2006 for a 2015 completion.

"This will create a corridor through Europe," French Prime Minister Jean-Pierre Raffarin told reporters of the link, which will mean drilling a 52 kilometre tunnel through the Alps.

"We (France and Italy) are agreed that our priority of priorities is to speed up growth," he told a news conference with Mr Berlusconi, who was due later to hold talks with President Jacques Chirac.

"I really want to underline the importance of this project," added Mr Berlusconi of the link, which Italy sees opening up a new freight route for its firms to markets west of the Alps.

In a separate statement, Mr Raffarin's office noted the project was conditional on EU grants for 20 per cent of the cost of the section around the Franco-Italian border, as envisaged when EU leaders launched the investment initiative last December.

Under the terms of the EU growth initiative, the private sector is expected to contribute up to 40 per cent of the total cost of individual projects on top of the 20 per cent maximum paid for by Brussels.