The text agreed last night in the Palais de l'Elysée in Paris also includes concrete ideas on the creation of a Public prosecutor's office, a common border police together with already known ideas of EU defence policies.

Mr Schröder described the agreement as an acceptable compromise, which would strengthen both the Commission and the European Parliament. Experts believe that this agreement could be the base for the division of power in the EU as it marks a compromise between Germany favouring a federal Europe with a powerful Commission in Brussels, and France defending the role of the nation state. It is also likely to satisfy the Commission and the small member states, who support mainly the German view.

The compromise is also likely to satisfy the larger member states as it fits with the so-called ABC-idea of José-Maria Aznar, Tony Blair and Jacques Chirac to create a top-figure post in the European Union.

Mr Schröder and Mr Chirac will send their new plan to the head of the Convention on the future of Europe, Valéry Giscard d'Estaing and heads of government in the 15 EU member states and the 10 countries invited for EU membership in 2004.

German-French motor back on track

Both Germany and France are eager to set the so called Franco-German motor back on track, with yesterday's agreement marking a new beginning. "The Franco-German relationship will play an important role in a Europe with 25 members," Mr Schröder said according to the Guardian. "If this relationship grows stronger, Europe will remain on a par with the Asian continent and the United States."

Joint commitment to act in common in the UN

On 22 January the German Bundestag and the French National Assembly will meet for the first time ever in a joint session at the symbolic setting of the Versailles palace outside Paris, where Mr Chirac and Mr Schröder will deliver addresses.

The meeting celebrates the 40th aniversary of the Franco-German Elysee treaty of 1963 that was set up to end rivalries between the two nations and seal their partnership in a new Europe. The two countries promised in the treaty to consult each other "on all important questions of foreign policy with a view to arriving... at a similar position," and heads of state and government agreed to meet every six months.

This agreement is set to gain new momentum in a declaration to be presented on 22 January, where the two heads and states are believed to announce a joint commitment to act in common in the UN.