The pact is designed to revive the economies of the region and ultimately bring the countries there into the European fold.

Some commentators have billed the project as the 'Marshall Plan for the Balkans'.

The creation of the right conditions for an economic recovery is an integral part of the UN Security Council resolution, in which the UN calls on all parties to support "the reconstruction of key infrastructure and other economic reconstruction".

The G8 has to make the country safe for refugees to return

Meeting in Cologne, the foreign ministers of the Group of Eight - USA, UK, Germany, France, Italy, Canada, Japan and Russia - stressed the need to re-establish law and order in Kosovo as a precondition for rebuilding the region.

German Foreign Minister Joschka Fischer, who chaired the meeting, said: "We want all countries in the region to develop toward an integrated Europe."

The Balkan countries are expected to sign up to Western-style economic reforms. In return, the world's richest countries promise economic aid and access to their markets.

The hope is that the aid will trigger an economic recovery and bring stability to the region, just like the Marshall Plan did after World War II.

Named after the US Secretary of State who devised it, the plan channelled grants and loans to European countries to revive their economies after the war.

Price tag

The World Bank's Rory O'Sullivan explains the task or rebuilding the Balkans

The cost of rebuilding the Balkans is difficult to estimate.

The World Bank has suggested that it could take up to $100bn to do the job. European Union officials have suggested a figure of about $30bn.

Western estimates suggest that Kosovo alone may need at least as much as the $5bn it took to rebuild Bosnia after the four-year war there.

Two pillars

The stability pact has two pillars - one political, one economic.

Aid money will be complemented by a forum to promote economic co-operation.

Bombing Kosovo cost money, now the West will pay to rebuild it

At the same time there will be permanent panels to settle border conflicts and minority rights disputes.

UK Foreign Minister Robin Cook called the stability pact a "new deal" for the region.

He said Nato would launch a security forum "to make sure we have greater security in the region".

The European Union, meanwhile, would "open up (its) markets for trade" so that Balkan countries "have a better opportunity at prosperity".

Reward

The conflict has had a dramatic impact on the region.

The disruption of shipping lines on the Danube, the drop of investor confidence in the region, the closure of air routes and finally the military conflict itself have all contributed to the setback of economic growth in the Balkans.

Mr Cook hinted that the aid package would be something of a reward for Yugoslavia's Balkan neighbours, who he said had been very supportive of Nato's military campaign.

And he made it clear that Serbia was unlikely to benefit from any aid package as long as President Milosevic and his political friends remained in power.