The European Union on Monday agreed to lift most sanctions against Zimbabwe firms and individuals once the country has held "a peaceful and credible" vote on a new constitution.

Welcoming "constructive dialogue" and political "progress", EU foreign ministers meeting in Brussels also agreed to resume direct aid to Zimbabwe's government after a 10-year suspension.

A statement from the 27 EU ministers said sanctions would be lifted against most of the 112 Zimbabweans still under an EU asset freeze and traval ban decided in 2002.

This would only occur once a referendum on a new constitution has been organised, probably at the end of the year.

"The EU agrees that a peaceful and credible constitutional referendum would represent an important milestone in the preparation of democratic elections that would justify a suspension of the majority of all EU targeted restrictive measures against individuals and entities," the statement said.

But sanctions will remain against President Robert Mugabe, according to EU diplomats.

"There is no question of lifting sanctions against Mugabe or anyone involved in continued abuses of human rights, incitement to violence, etc -- that is simply not up for discussion," an EU official said.