BRUSSELS, Belgium (AP) _ European Union nations moved closer to an agreement on ways to coordinate economic policy after most of them adopt a common currency Jan. 1, 1999.

A flurry of diplomatic activity this week has set the stage for a compromise at a summit of the 15 EU leaders opening Friday in Luxembourg.

The deal aims to satisfy French and German demands for a special economic council for single-currency nations, without alienating Britain and others who intend, at least initially, to stay outside the euro currency plan.

``We think the countries of the euro-zone can meet in an informal way,'' said Jacques Santer, president of the EU's executive agency. ``If other countries ... can participate as observers, we have no objections to that.''

There was less optimism about a deal on another euro squabble: the feud between France and the Netherlands over should head the new central bank, which will run monetary policy after the euro's launch.

``I don't think we are ready to find a definitive solution,'' Luxembourg Prime Minister Jean-Claude Juncker said Tuesday, after meeting his French counterpart Lionel Jospin.

Hopes of a deal on the euro council rose after talks Tuesday evening between the German and French finance ministers.

Germany's Theo Waigel said Britain and other outsiders could be offered ``observer or briefing status.'' Dominique Strauss-Kahn of France said they could be invited to discuss ``matters that are important to them.''

That meshed with comments from potential outsiders. British Prime Minister Tony Blair's office indicated that under a deal in the works, Britain would be invited to attend discussions about employment and other labor policies.

Euro-zone nations would talk alone on such monetary policy issues as exchange rates.

Eleven nations are expected to swap their currencies for the euro in a year's time. Britain, Sweden and Denmark want to keep their national currencies, at least for now. Greece has failed to cut its budget deficit and inflation rate to levels required for joining.

All sides have softened their tone since a testy meeting of finance ministers last week when euro insiders threatened to shut the others out of a euro council.

In the central bank dispute, the Dutch claim the support of 14 nations for Wim Duisenberg who now heads the European Monetary Institute, the forerunner of the central bank. France has vowed to go the distance for its nominee, central bank chief Jean-Claude Trichet.

``We've only just proposed him, we're not going to withdraw,'' Strauss-Kahn said in Bonn, Germany.

Dutch Prime Minister Wim Kok was equally defiant, refusing to consider a compromise to let Trichet and Duisenberg share the eight-year bank term.

``Our first priority is to get full support for Mr. Duisenberg,'' Kok told reporters in The Hague, Netherlands. ``It would be my wish to get an early decision.''

EU leaders have until May 2 to agree on a bank president, but some fear a long dispute would undermine confidence in the bank.

``It would be wise to find a solution as soon as possible,'' Santer told a news conference. But he thought it unlikely a deal would be struck at this week's summit.