Finance ministers from the leading industrial countries have been meeting senior officials from the international financial organisations to discuss economic reconstruction in the Balkans.

The meeting in Brussels was intended to coordinate the international aid effort in Kosovo and neighbouring countries.

The European Union says it will put up about half-a-billion dollars in aid, and the World Bank has said it may commit $60m.

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However, none of the participants has been willing to estimate the extent of the damage caused in Kosovo and the rest of Yugoslavia by the Nato bombardment.

The BBC Economics Correspondent, Andrew Walker, who is following the meeting in Brussels, says it will be two or three months before the assessments already underway are completed.

Officials from the World Bank and the European Commission, who are jointly chairing the steering group, say the physical damage in Kosovo itself may not be as extensive as they had feared.

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A senior World Bank official, Rory O'Sullivan, who has just returned from an initial assessment, said electricity, telephones and water were working in many of Kosovo's villages.

Nonetheless, the UN's civilian administrator for Kosovo, Bernard Kouchner, told the meeting that aid for the returning refugees was needed more rapidly than was originally planned.

The G-7 are discussing, among other issues, how realistic it is to boost the economy of the region without helping Serbia.

The Americans and the British insist that Yugoslav President Slobodan Milosevic must be toppled before Serbia receives any reconstruction aid.

This position has found general acceptance in the international community, according to EU Monetary Affairs Commissioner Yves Thibault de Silguy.

"It is clear that humanitarian assistance will continue," he said, but "in the long-term and medium-term perspective, for political reasons it will not be possible to go on if the political regime continues."

However, economists at the World Bank say that, in the long term, it will be impossible to bring prosperity to the region if what they call a black hole remains in the middle of it.

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The World Bank is also adamant that the money used in Kosovo and surrounding nations must not simply be transferred from other aid projects.

EU finance ministers have made it plain the money must be found from within their existing budgets.

A first Kosovo donors' meeting conference will be held in Brussels on July 28, where an interim damage assessment report will be presented and fundraising will begin.

A more detailed planning meeting on how to use the funding will then be held in September.

War crimes

Mrs Arbour: hard evidence against Milosevic

United Nations War Crimes Tribunal Chief Prosecutor Louise Arbour has meanwhile begun a fact-finding mission in Kosovo.

She is assessing evidence gathered by experts investigating alleged atrocities.

She will have talks with senior officers of the international peacekeeping force and familiarise herself with investigative work on the ground.

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Speaking before her arrival, Ms Arbour said the facts uncovered in Kosovo so far gave strong support to the charges already pressed against the Yugoslav President, Slobodan Milosevic, and four of his associates for the murder and deportation of thousands of ethnic Albanians.

Ms Arbour's trip comes six months after the Yugoslav authorities barred her from entering Kosovo when she tried to investigate alleged killings of civilians in January.