President Jacques Chirac telephoned Libyan leader Muammar al-Qadhafi’s "to tell him of the importance France attaches to solving this problem which is so painful for the victims' families," the Foreign Ministry said in a statement.

“We do not question the agreement reached on Lockerbie and we welcome the fact the families involved have won satisfaction," it said.

"Until equal treatment is granted, the lifting of international sanctions against Libya should be ruled out,” the statement added.

French veto

France has said it will veto a United Nations vote to lift sanctions on Libya unless an agreement over compensation can be reached.

Though Libya has never admitted its involvement in the downing of the commercial airliner, six of its agents were convicted of their role in the attack.

"The negotiations have failed"

Libyan source

Families of the 170 people who died in the bombing have already received some compensation from Libya, though much less than that agreed on last week for the families of the victims of Lockerbie.

They have been in Libya negotiating with the government through a charity run by Colonel al-Qadhafi’s son Seif al-Islam. Talks stalled after the Libyans said they were demanding too much.

Talks fail

“The negotiations have failed,” a Libyan source who asked not to be identified told AFP.

“The reason was the exaggerated figures sought by the families. They wanted the equivalent of the Concorde crash compensation,” he added.

Families of the people who died in the 2000 Air France Concorde crash in Paris won a total of $120 million in compensation.

US officials have accused France of double-dealing by accepting compensation years ago and now demanding more.

The UN Security Council was set to lift sanctions against the isolated North African state, but delayed a vote while France made its last-minute demand for a supplementary compensation to the $34 million Tripoli has already paid.
 
Libya last week said it was willing to seek a compromise with the French families, but warned Paris that its threat to veto or block a UN vote on lifting sanctions could threaten the Lockerbie deal.