Over their evening meal, the 25 heads of state and government will lay out their visions of enlargement after the bloc welcomes in Bulgaria and Romania as the 26 and 27th members on January 1.

"The aim is to confirm a common understanding on the future of the enlargement process," Finnish Prime Minister Matti Vanhanen, hosting the summit as EU president, said in an invitation to his fellow leaders.

Before dinner, Vanhanen will present an analysis on the constitution, which was meant to help the EU run more smoothly as it grows, until it was rejected by French and Dutch voters in referendums last year.

Those votes, due in part to fears of "enlargement fatigue" and the idea of a large, relatively poor and mainly Muslim country like Turkey joining, sent the Union spiralling into its worst ever crisis.

Indeed the word "constitution" has become damaged goods and the EU's political elite have only just begun to lift their heads from the bunkers to start talking about the constitution publicly again.

An EU official said that "the level of ambition is weak" at the moment on enlargement, as the member countries know that any concrete proposals could be put on the back burner until the EU's "institutional" house is put in order.

In any case, the leaders are expected to concede that the impasse over the constitution must end before new members are considered beyond Bulgaria and Romania.

According to draft conclusions prepared for the summit, the leaders will stress "the importance of ensuring that the EU can maintain and deepen its own development while pursuing the enlargement agenda."

"As the Union enlarges ... successful European integration requires that the EU institutions continue to function effectively and that EU policies meet their goals and are financed in a sustainable manner," the draft text says.

The German EU presidency, starting on January 1, is expected to quietly take forward the constitutional process, with no real decisions expected before France takes over at the helm in the second half of 2008.

Whatever the outcome here, the leaders' stance will have major repercussions for Turkey, which began often-torturous membership talks last year, but also for EU candidates like Croatia and Macedonia and other hopefuls in the Balkans.

Turkey may well figure on the dinner menu too, with British Prime Minister Tony Blair, a strong supporter of Ankara's candidacy, expected to travel to Ankara after the summit ends on Friday, in a gesture of solidarity.

Other points of order include the increasingly high-profile issue of sustainable energy supply, but the real initiatives on that subject are also expected to be taken by Germany.

With Turkey resolved for now and nobody keen to wade too far into the issue of institutional reform, one other issue is looming as a possible bone of contention, in what is likely to be a quiet and short summit, that of Serbia.

Italian Prime Minister Romano Prodi could raise the subject of Serbia over dinner.

The Union froze in May a Stabilisation and Association Agreement -- a first step toward joining the EU -- over Serbia's failure to hand over former Bosnian Serb military chief Ratko Mladic to the UN war crimes court.

Prodi could ask his counterparts to lift the EU's condition of full cooperation with the court for the talks to resume.

But most would prefer to send Serbia a signal that its future lies in the EU, amid rumblings from nationalists in campaigning for elections there on January 21 to be dominated by Kosovo's aspirations for independence.

It also prohibits any political event at the Valley of the Fallen, a large monument near Madrid that includes Franco's tomb and is the most potent symbol of his regime.

"Along with increasing the rights of victims, the bill aims to pay off a debt, a debt of injustice," said Deputy Prime Minister Maria Teresa Fernandez de la Vega at the start of the debate.

The law says all victims of the Civil War and the Franco dictatorship will have a year to request reparations from an ad hoc commission that was created to draw up the bill. A total of $26.4 million will be made available for payments.

Several political parties have proposed major amendments to the bill, saying it does not go far enough to restore the rights of victims and in condemning Franco and his regime. One amendment proposed by three parties calls for the annulment of verdicts reached at trials carried out during Franco's 1939-75 dictatorship.

Meanwhile, the leading conservative opposition Popular Party has called for the bill to be thrown out altogether, arguing that it reopens old wounds.

The bill, known as the Historic Memory Law, is expected to get past an initial vote allowing it to be processed by Parliament but it is likely to take several months before it is finally approved.

The measure follows a growing movement in recent years by families seeking a proper burial for thousands of relatives executed by Franco's forces and supporters during and after the Civil War and who were buried in unmarked graves.

Both sides in the war committed atrocities, including the execution of civilians. The conflict pitted soldiers loyal to an elected Socialist- led government known as Republicans against rebel Nationalist troops who backed Franco in his military uprising that ultimately toppled the government. Franco died in 1975.

His lawyer Hashmat Habib said: "The court has dropped charges of terrorism against him. It's a big decision."

The arrest of Rauf in August led to raids on homes in Birmingham, High Wycombe and East London. More than 20 people were held over an alleged plot to smuggle liquid explosives on to a number of US-bound jets and blow them up in mid-air.

Rauf, who left his Birmingham home four years ago, was described at the time as a plot ringleader who had contacts with al-Qaeda in Afghanistan.

Stringent new security checks were immediately introduced at UK airports - causing chaos at the height of the holiday season.

Passengers were stripped of their hand luggage and banned from taking liquids on board planes.

Mums were even forced to sample baby milk in front of security guards to prove it was safe.

The suspects arrested here were held on charges ranging from plotting to murder to aiding an act of terrorism.

Some were later released because of insufficient evidence - including Rauf's 22-year-old brother Tayib.

Rauf is still being held in Rawalpindi on forgery charges as well as allegedly having explosives.

Mr Habib said the explosives charge related to Rauf's possession of hydrogen peroxide. The liquid can be mixed with other chemicals to make explosives. But it is also commonly used as a mild antiseptic.

He added: "These are not serious charges and I hope he will be acquitted and freed."

UK prosecutors yesterday said the dropping of charges against Rauf would make no difference to the case against the 17 people awaiting trial here.

Rauf left Britain in the wake of the killing of his uncle Mohammed Saeed.

He was stabbed to death in his Birmingham home in front of his wife and two children after a row over an arranged marriage.

After moving to Pakistan, Rauf married a woman related to the leader of a banned Islamic militant group.

A charity set up by his father Abdul had its assets frozen amid claims it raised cash to fund terrorism.

don.mackay@mirror.co.uk

"When the minister calls people 'scum,' it doesn't help us, because we cannot avoid feeling that we're being targeted," said Malik Meraoumia, an ethnic Arab businessman from Amiens. He added: "What he did, he split France in two. The impression I have is, there's the France of the suburbs and there's the rest."

Mr. Sarkozy is still reeling from his description of young troublemakers in the country's grimy suburbs as "scum" and of his subsequent handling of the nightly clashes there late last year, in which he said the answer was zero tolerance of crime.

In a Cevipof poll in September, 49 percent of French voters who responded said they were afraid of him. Just last week, Mr. Sarkozy failed to show up for a dinner in Paris that brought together more than 300 Franco-African party members, sending a top aide in his place and opening himself up to criticism.

But on his home turf on Wednesday, Mr. Sarkozy clearly wanted to prove that he was a conciliator and that he was as concerned about job opportunities, quality education and decent housing for young people as he was about law and order.

"I'm not allowed to disappoint you," he said in a speech to the hundreds of attendees in closing the conference. "This day will be useful only if it has a tomorrow."

Reiterating his support for some degree of affirmative action in France, he added: "You are French exactly like the others, but you are burdened with a certain number of handicaps. We have to help you more than the others."

Mr. Sarkozy did not take part in the whole daylong conference, even though he was the host. He sat in on the end of the final session and took no questions after his speech. He was not around to answer Mr. Meraoumia, who had raised his concern at a morning session.

Officially, the conference was not a campaign event. Mr. Sarkozy is not yet the official nominee of the governing Union for a Popular Movement, although he is expected to be nominated next month.

With France's presidential election four months away, Mr. Sarkozy and the other leading candidates are campaigning hard to seduce the country's alienated and disadvantaged ethnic populations.

One goal, certainly, is to persuade the largely ethnic Arab and African populations that live in the suburbs to register and vote. But a much larger aim is to convince the French electorate as a whole that the country's economic, social and cultural divide can be narrowed and that people can feel confident abut the future.

"Five years ago, immigration and integration were not campaign issues of the mainstream parties," said Vincent Tiberj, a sociologist. "This time, the French are questioning the failure of integration and asking themselves about their capacity to integrate new foreigners. The debate has changed."

Inclusiveness has also emerged as a major theme for Ségolène Royal, the Socialist Party's nominee. It is high even on the agenda of Jean-Marie Le Pen, the leader of the far-right National Front who, in a recent poll, was supported by 17 percent of voters surveyed.

Mr. Le Pen, who has traditionally campaigned on an anti-immigrant platform tinged with racism, has changed his strategy this time.

On Monday, he unveiled an election poster that seeks the support of Arab and black voters and criticizes what he characterizes as the failed integration policies of the political establishment.

In one poster, a young black woman with a long mane of hair and a bare midriff makes a thumbs down sign. The slogan reads: "Right/Left. They have broken everything!"

Another poster shows the 78-year-old Mr. Le Pen walking with the young woman and a number of other people under the slogan, "With Le Pen. All Together, Let's Lift Our France Back Up."

In unveiling the campaign, Mr. Le Pen's daughter, Marine, who is his campaign manager, explained that his candidacy would "bring people together regardless of religious, ethnic or even political traits."

In a speech in September, Mr. Le Pen for the first time urged "French people of foreign origin" to join his movement. In a subsequent interview with a Web site run by suburb associations, he denied ever making a judgment about the "superiority of one race over another."

As for Ms. Royal's campaign, the Socialist Party in the "93," the postal code for the Seine-St.-Denis area where most of the difficult suburbs of Paris are, unveiled an anti-Sarkozy poster campaign this month.

Its message is that if residents of the suburbs stay away from the polls - as they have tended to do - they will end up with Mr. Sarkozy as president.

Ms. Royal herself is finding that thorny issues such as unemployment, delinquency and violence do not lend themselves to easy answers, and she is already recalibrating her message for the suburbs.

When Ms. Royal was in the Paris suburb of Bondy in May, she took a strong anticrime line. Among her proposals were mandatory military or community service for delinquent youths over 16 and the creation of "parents' schools" for those whose children commit "acts of incivility."

"We need a return to the heavy hand," she said.

Back in Bondy last month for the Parliament of the Suburbs, a gathering of 400 people from disadvantaged suburbs throughout France, she emphasized the positive and kept her message more vague.

She called the integration of minorities into the labor force "a question of survival" for France's struggling economy, adding, "France not only needs you, but it is you who are the future of France."

Neighborhood leaders and residents of the suburbs have criticized politicians to varying degrees for using the suburbs as a convenient backdrop to promote their message.

Indeed, some participants at Wednesday's conference at the Interior Ministry, titled "The Minister of the Interior Welcomes the Youth," dismissed it as a performance for the news media.

"It's clear this is a media show," said Mohamed Hamidi, a high school teacher who is the editor of the Bondy Blog, a popular Web site about the suburbs. "For Sarkozy to try to seduce the voters of the suburban neighborhoods now - it's too late."

French trade minister Christine Lagarde blamed the grim trade figures on the tight policies of the European Central Bank, which has raised interest rates six times in a year to 3.5pc. The rate rises are the key factor pushing up the euro.

"We sold one less Airbus, we haven't sold any satellites, and we have not sold any ships. Frankly, the battle against inflation has been won. It's high time the ECB began thinking about growth," she said.

Her comments came as French leaders of all stripes stepped up attacks on the bank, accusing it of "monetary masochism". The euro has risen 11pc against the US dollar and most Asian currencies this year, and 20pc against the Japanese yen.

French premier Dominique de Villepin called on EU states this week to reassert national control over their economies and set proper limits on the powers of the ECB. "We must clarify matters in exchange rate policy, which means taking back our sovereignty."

Mr de Villepin was alluding to a clause in the Maastricht Treaty (111-4) giving EU ministers power over the currency. It is a tool that could - in effect - enable politicians to set interest rates, stripping the ECB of its independence. "This is a tough fight that we are going to have to carry out at a political level," he said.

Ségolène Royal, socialist candidate for the presidential elections in May, went even further, accusing the ECB's president Jean-Claude Trichet of usurping democratic authority.

"It's not for Mr Trichet to dictate the future of our economies: it's a matter for our leaders chosen by the people. We must completely change the charter of the central bank," she said.

ECB governor Guy Quaden said there was no reason for states to "panic" about the currency level. "The euro is relatively high but we are not in uncharted waters. It's striking how one hears these complaints during presidential campaigns," he said.

However, critics say the landscape has changed beyond recognition since the last bout of European currency strength in the early 1990s.

Italy has lost 40pc in competitiveness against Germany since the exchange rates were fixed ten years ago, while France last lost over 20pc - yet they still have to compete in the same currency zone.

Germany is re-emerging as a Teutonic Tiger with exploding exports to China, Eastern Europe, and the Middle East, while Europe's 'Club Med' bloc are steadily losing share of world markets.

Derek Scott, Tony Blair's former economic adviser, said the euro system was becoming unworkable as the one-size-fits-all monetary policy drove countries further apart.

"The ECB faces an impossible task because there is no such thing as Euroland: there are groups of countries going different ways," he said.

"Germany has clawed back competitivenes by squeezing its economy, but Italy, France, Spain and others have been enjoying property booms. Boom goes bust," he said.

"In the end, the ECB may to have to respond to the needs of the weakest economies, or monetary union will fall apart," he said.

Philippe de Villiers, leader of the eurosceptic MPF movement, said he was launching a referendum drive for a return to the franc. "The euro is a failure. It's weakening our industry and our exports to the point where Airbus is preparing to build plant directly in the United States and China," he said.

"As we saw with the Czech and Slovak currency split, leaving the euro is technically quite simple. We could do it in eight days," he said.