Government officials and representatives of industry are reportedly willing to raise their offer from 6 billion marks to up to 10 billion marks, while lawyers representing the victims have dropped their demands by about half to between 10 billion and 15 billion marks, participants in the talks said.

One of the lawyers, Edward Fagan, said the sides were getting closer to an agreement on the size of the settlement.

But he said the question of how the money would be allocated among slave labourers who worked in concentration camps and those forced to work in industry, agriculture and other areas was still under negotiation.

The German government said last week that it was prepared to raise its 2 billion mark offer of compensation by 50% if industry made a similar move. Businesses are now reported to be prepared to do so.

Walkout threat

Mr Fagan, who had threatened during the talks on Tuesday to lead a walkout of lawyers representing the victims, welcomed the expected new offer as a sign of "serious movement and flexibility from Germany".

"It will help establish a range in which we can continue to negotiate in good faith," he said.

German companies proposed the compensation fund in February under pressure from lawsuits brought by survivors in the United States.

About 50 firms are contributing to the fund, which aims to compensate about 1.5 million to 2.3 million victims.