Free trade announcement launches tense EU summit

Belgian foreign minister Steven Vanackere, whose country holds the rotating EU presidency, described the EU's first free trade deal with an Asian country as 'the most ambitious agreement ever'.

"This is the first of a generation of bilateral trade agreements that will bind Europe and Asia together in an ever closer economic bond," Vanackere told reporters.

Italy initially blocked the deal, fearing its auto sector, especially Fiat's range of small cars, would be threatened by lowering tarifs on rival Hyundai models from South Korea.

Rome lifted its block following the implementation of a safeguard clause to protect the small car industry from "sudden surges of imports in sensitive sectors".

Italian prime minister Silvio Berlusconi, who is struggling on the domestic political front and whose flight was delayed due to technical problems, was not present for the announcement.

But for other reasons, all eyes were on a tight-lipped French President Nicolas Sarkozy as he entered the day-long talks.

"We're discussing it in the corridors," said European parliament chief Jerzy Buzek when asked if the Roma row had hijacked the talks.

"It's a very deep and serious problem for the European Union as a whole," Buzek said. "This is a moment to treat social exclusion and poverty. It's not only a problem for France."

Threats of legal action from European justice commissioner Viviane Reding over last month's expulsion of Roma people from France, followed with Sarkozy mocking the threat and saying Reding's home country of Luxembourg could have the Roma if they wished.

Prior to the meeting, Reding expressed regret over drawing comparisons between France's expulsion of Roma and its World War Two-era Vichy government.

"Let's all calm down and try to find a solution," said Finnish Foreign Minister Alexander Stubb at the summit. "What we've seen in the past few days of course is a little bit unusual for Europe.

"My position is that the European Union is an area based on the rule of law," he added. "So all of us must be very sensible about it. The Commission is the guardian of the treaties. They have said that they will have a look at this."

Discussion over aid for flood-hit Pakistan was also on the agenda.

The South Korean trade deal will be formally signed in Brussels on 6 October.

Negotiators hope to reach a similar deal with India by December. Another deal is in the works with Mercosur, a South American trade bloc comprised of Argentina, Brazil, Paraguay and Uruguay.