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At long last, a deal is struck on the EU defence force

Britain, France and Germany finally overcame US objections last night and struck a deal on European Union defence, ending months of wrangling over whether Europe's new military co-operation will rival Nato.

Under the agreement, the EU will be able to have an autonomous military planning capability, but that will not become a standing headquarters. The deal had been held up for days because of reservations from Washington which feared that such an arrangement might rival and undermine the transatlantic Nato alliance.

But tensions over the project began to subside last week when the hawkish US Defence Secretary, Donald Rumsfeld, avoided criticising the plan. Washington is believed to be broadly supportive of the plan.

The deal means the "main option" for planning European military operations will be to site them in national headquarters in the UK, France, Germany, Italy or Greece, something long accepted by Britain. But where no headquarters is nominated, the EU planning cell, in Avenue Cortenberg in Brussels could be made operational. That would have "responsibility for generating the capacity to plan and run the operation", a document circulated last night said.

In a concession to the British, the agreement says it "would not be a standing HQ", and would be up and running for specific operations only. A British proposal to set up a permanent EU presence at Nato's military planning headquarters at Mons in Belgium has been accepted.

Last night, Tony Blair's official spokesman said: "We believe this arrangement is good for Nato and good for European defence. The Prime Minister has always believed that both are important but that European defence should develop in a way that is complementary to Nato and does not undermine or duplicate Nato."

The document, which will go to all EU governments today, is a carefully crafted compromise under which both sides have ceded ground. France and Germany had insisted they must have operational military planning capabilities independent of Nato.

While the UK accepted that, they have limited the scale of such an operation, and seen off plans to set up a rival headquarters in the Brussels suburb of Tervuren. Britain feared that might eventually grow to rival Nato and would be outside the UK's influence.

Although the deal is not part of the new EU constitution, it has been agreed as part of an overall package, two elements of which are to be written in to the text. Britain has agreed to accept so-called "structured co-operation" under which groups of EU countries can band together to forge closer integration. In an effort to boost spending in European nations, only those who have sufficient capabilities to be able to mount operations by 2007 are likely to be admitted to the club.

Advocates of EU defence say that is vital, to close the vast disparity between the military capabilities of Europe and the US. Britain has also overcome earlier objections and accepted a mutual defence clause, after language which asserts the importance of Nato as the security organisation of first choice for its members.

Four non-aligned nations, led by Ireland, are still haggling over the wording of the text to defend their neutrality. Last night's deal is the culmination of negotiations on how to improve Europe's military clout. The EU will mount more peace-keeping or crisis intervention tasks, rather than waging full-scale military conflicts.