German and Czech officials meeting in Prague have formally agreed to launch a fund to aid Czech victims of the holocaust.

Germany is to give $80 million (£52 million) to the fund over the next four years, with the Czech Republic contributing $14 million (£9 million).

The Czech German Future Fund, as it is known, will start operating on January 1, although the sensitive issue of who will manage it has still to be resolved, as Caroline Wyatt reports from Bonn.

The fund to help Czech victims of the holocaust is a significant move towards healing the rift between Germany and the Czech Republic caused by the Nazi invasion of Czechoslovakia at the outbreak of the Second World War.

The creation of the fund was agreed as part of a Czech-German reconciliation accord which was signed almost exactly a year ago.

The money will go towards helping almost 9,000 survivors of the holocaust, including 2,000 Jews.

Most of it will be used to build and run old peoples' homes, though some money will also be spent on youth exchanges between the two countries.

The launch of the fund had been held up by opposition from the Sudeten Germans, who were expelled from the Czech Republic after the defeat of Nazi Germany.

The Sudeten Germans, who were used as a pretext for Hitler's invasion in 1939, remain a powerful lobby group in the southern German sate of Bavaria and are demanding a place on the committee which will administer the fund.