"This is a very clear sign and demonstration of EU confidence and support," EU enlargement official Pierre Mirel told reporters after the signing ceremony.

Mirel, the head of the 27-nation bloc's enlargement department for the Western Balkans, signed the agreement with Bosnian Prime Minister Nikola Spiric.

The funds are for the 2007-2011 period and are meant to help implement reforms needed to meet EU standards and help Bosnia make progress in EU integration, said Mirel.

The grant comes under EU pre-accession funds available after Bosnia in December initialled its Stabilisation and Association Agreement (SAA), seen as the first step towards full EU membership.

Bosnia was expected to start implementing the reforms and formally sign the SAA deal in the first half of 2008.

Key police reforms were a condition set by the European Union before the membership process could begin.

In order to complete the signing, Bosnia must implement them and show progress in reforming public media and cooperation with The Hague-based UN war crimes tribunal.

However, the leaders of ruling Croat, Muslim and Serb parties are yet to agree on laws defining the police reforms.

Post-war Bosnia consists of two entities -- the Serbs' Republika Srpska and the Muslim-Croat Federation. Each has its own government, parliament and police.

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