By George Parker in Naples and Judy Dempsey in Brussels
Published: November 30 2003 17:56 | Last Updated: November 30 2003 17:56

Hopes were rising in European capitals on Sunday that a deal could be struck this month on a new EU constitution, after breakthrough deals were outlined in the field of defence, foreign affairs and remodelled EU institutions.

Franco Frattini, Italian chair of weekend treaty negotiations in Naples, said foreign ministers had "exceeded expectations" in clearing the ground for a deal.

Most ministers left the talks in buoyant mood, and were especially relieved that a deal had been done on bolstering the EU's flyweight military capability.

The plan will come under scrutiny at a meeting of Nato ministers in Brussels on Monday, with Donald Rumsfeld, US defence secretary, expected to give his views on suspicions that it might undermine the North Atlantic alliance.

The European defence policy, backed by Britain, France and Germany, would see the EU develop a small military planning unit capable of running operations independent of Nato.

Although it would have only a skeleton staff, based in Brussels, one Nato diplomat said: "People will regard this as a Trojan horse. You start with 30 and end up with 300. It is a bridgehead to something much bigger."

The plan may rankle with the US, but it represents one of the most significant elements of the EU's new constitution, due to be agreed by 25 leaders on December 12-13 in Brussels.

The new treaty aims to sharpen Europe's presence on the world stage, with a streamlined foreign policy headed by a single foreign minister and a new European Council president.

The talks in Naples made further progress towards defining the job of the new foreign minister, who will be based both in the Council of Ministers, answering to member states, and the European Commission.

However, Britain restated its opposition to any dilution of the principle that foreign policy must be decided by unanimity, and said it would block attempts to remove the national veto.

The Naples talks were held against a backdrop of resentment from some small EU countries over the way France and Germany last week engineered the collapse of the Union's stability and growth pact.

One EU diplomat said the dispute had "emboldened" smaller countries to push for more power under the new constitution, and it now looks certain they will retain the right to send a member to the European Commission in Brussels.

Mr Frattini also proposed a compromise deal in the dispute about EU voting power, which would also increase the strength of smaller countries at the expense of the big countries.

The debate about the allocation of power in the enlarged EU of 25 remains the biggest obstacle to a final deal, with Spain, Poland and Germany the main protagonists.

Mr Frattini's suggestion that a final decision might be delayed for several years did not go down well with Germany - which stands to gain most from a population-based voting system.

Source: The Financial Times at: http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1069493594619&p=1012571727092