Foreign ministers from the new Mediterranean Union struck a deal Tuesday for Barcelona to host the forum’s headquarters and for Israel and the Arab League to take part side-by-side.

The Union’s 43 member states held two days of talks in the port of Marseille to end a four-month deadlock on the two contentious issues, which threatened to hamstring the fledgling organisation.

French Foreign Minister Bernard Kouchner and Egyptian Foreign Minister Ahmed Abul Gheit, whose countries currently co-chair the forum, announced the breakthrough at a joint news conference in the southern French city.

“It wasn’t supposed to work, and yet it did,” said Kouchner, adding: “The essential points were accepted completely and without reservation by all 43 states” in the Union for the Mediterranean.

Ministers from the Mediterranean’s mainly-Arab southern rim agreed to back the Spanish city of Barcelona’s candidacy to host the Union in exchange for the post of secretary-general going to a southern member.

They also clinched a deal on granting the Arab League a full-time seat at the forum — a key demand of Arab members, strongly opposed by Israel which feared the pan-Arab group would try to block its involvement.

“The Arabic participation will take place in every meeting with the right to speak at all levels,” said Abul Gheit, although it will have no right to vote.

Israel agreed to the Arab League’s role in exchange for one of five deputy secretary-general posts for an initial three-year period, possibly renewable.

The deputy posts will rotate between three European members and two southern ones, and will initially be held by the Palestinian Authority, Greece, Malta and Italy, alongside Israel, according to the final declaration.

The text — with likely technical amendments — still has to be formally ratified however by the two co-presidents of the Union, French President Nicolas Sarkozy and his Egyptian counterpart Hosni Mubarak.

Launched at a Paris summit in July, the new union brings together EU members with states from north Africa, the Balkans, the Arab world and Israel in a bid to foster cooperation in one of the world’s most volatile regions.

An Israeli diplomat said it agreed to the Arab League “compromise” on the basis it would be able to play a front-seat role in setting up the fledgling Union, and hopefully build bridges around the Mediterranean.

But she warned “the Barcelona Process can never replace direct bilateral negotiations” to resolve Israel’s conflicts with Arab nations.

A spokesman for the Arab League also warned that its participation would not lead to normalisation with Israel, Egyptian state news agency MENA reported.

EU foreign policy chief Javier Solana said he was “delighted” by the accord on Barcelona, while EU external relations commissioner Benita Ferrero-Waldner called it a “logical choice.”

The Mediterranean capital of Spain’s Catalonia region, Barcelona lent its name to the 13-year-old Barcelona Process, a previous EU regional initiative that stalled in part over Arab-Israeli disputes.

In exchange for hosting its headquarters, Spain also agreed to drop the tag “Barcelona Process” from the name of the new forum.

France, which championed the Union, hoped that by basing it on modest regional projects, such as cleaning up pollution in the Mediterranean, it would be able to sidestep the trap of regional disputes.

Priorities set out in the declaration include fighting pollution in the Mediterranean, solar energy, building land and sea highways and cooperation on higher education and research.

The Marseille accord, clinched after months of tough negotiations, rescues the forum from the threat of looming deadlock, but it also amounts to formally recognising tensions over the Israeli-Palestinian conflict.

And the highly-political compromise to create five deputies to the secretary-general is a far cry from the slimmed-down, nimble governing structure at first envisaged for the Union.