US and German negotiators have agreed on a compensation fund worth DM10bn ($5.2bn) for Nazi slave labourers.

The breakthrough in the lengthy negotiations came after the German Government agreed to raise its offer, adding to the DM5bn ($2.6bn) already pledged by industry to compensate those forced to work as slaves under Hitler's regime.

Michael Witti, a Munich lawyer representing the victims, said the agreement would be formally announced in the next few days.

The US envoy to the talks, Deputy Treasury Secretary Stuart Eizenstat, announced the deal in a conference call with lawyers and victims' groups, Mr Witti said.

"The deal is done," he added.

The announcement comes less then a week after Germany said it was standing firm on a "final offer" of DM8bn ($4.2bn), which was rejected by US lawyers and the World Jewish Congress as insufficient.

Correspondents said some two million people could be eligible, most of them eastern Europeans who were unable to make any claims for compensation during the Cold War.

Big firms pay out

Lawyers representing the victims had asked for DM11bn ($5.7bn) in compensation for victims of work programmes in concentration camps and others deported and forced to work for Nazi Germany.

The lawyers also wanted US companies with German subsidiaries to supply DM1bn ($517m) of the sum.

The German Government had previously offered DM3bn ($1.6bn) to go along with the DM5bn ($2.6bn) pledge given by about 60 German companies, including Daimler, Chrysler and Volkswagen.

Chief German negotiator Otto Lambsdorff told the Berliner Zeitung that Chancellor Gerhard Schroeder agreed to raise the offer because "industry cannot and should not bear a higher sum" than already on the table.

"The firms also took part, but the state's responsibility is higher," Mr Lambsdorff told the newspaper.

Mr Witti said the offer was still low but he would accept it because it was "negotiated as a fair settlement".

All parties involved in the negotiations are scheduled to meet again on Friday.