Heads of state and government from an arc of countries from Morocco to the Balkans, representing some 756 million people, are set to endorse the project.

Twenty-seven EU nations are among those taking part in the new union.

"It doesn't mean that all of the problems are resolved of course," Sarkozy said before the summit.

"But the goal of the summit ... is that we learn how to love each other in the Mediterranean, instead of continuing to hate and wage war."

Muammar Gaddafi, the Libyan president, has boycotted the talks, but Recep Tayyip Erdogan, the Turkish prime minister, is due to attend after pleas from Sarkozy, who has opposed Turkey's membership to the EU.

Barcelona process revived

Sarkozy's project aims to build on the Barcelona process of 1995, which aimed at Euro-Mediterranean dialogue and co-operation, but was plagued by disputes between Israel and its Arab neighbours.

Factbox: Union of the Mediterranean

GOALS: The Union for the Mediterranean is designed to cement a relationship between Europe, north Africa, the Middle East and the Balkans. It upgrades the EU's Barcelona process, launched in 1995.

MEMBERS: The 27 countries of the European Union plus Albania, Bosnia-Herzegovina, Croatia, Monaco and Montenegro. From northern Africa: Algeria, Mauritania, Morocco and Tunisia. Turkey will take part along with Egypt, Israel, Jordan, Lebanon, the Palestinian Authority and Syria.

PROJECTS UNDER DISCUSSION: Cleaning up pollution in the Mediterranean, building highways and sea routes, disaster response, developing renewable energies - mainly solar power - boosting education and research, and an initiative to help foster business.

MANDATE: The union will hold summits every two years, with foreign ministers meeting annually. It will have a co-presidency, to be shared between "North" and "South".

"We would like, in the future, to speak as equals about their problems with Mediterranean rim countries and also to help resolve European problems," Angela Merkel, the German Chancellor, said on Saturday.

The union is first set to discuss modest goals of cleaning up pollution in the Mediterranean, building highways and sea lanes, disaster response projects, developing solar energy, boosting education and research, and helping to foster business.

France's Le Monde newspaper described the difficult diplomacy leading up to Sarkozy's project as a "forceps birth for the Mediterranean Union".

After bowing to German demands that the new club be open to all EU members and not just Mediterranean rim countries as initially proposed, Sarkozy engaged in some last-minute cajoling to convince key players Turkey and Algeria to take part.

Arab countries, led by Algeria, managed to secure guarantees in the final declaration of the founding summit that the Union will not allow a creeping normalisation of ties with Israel.

Bashar al-Assad, Syria's president, said on Saturday that Syria and Lebanon, who are both present at the conference, had agreed to establish diplomatic relations, opening up embassies in each country's capitals for the first time since independence.

France had also floated the idea of a historic meeting between Assad and Ehud Olmert, Israel's prime minister, but both sides rejected the move as premature.

Syria-Lebanon relations

Relations between Israel and Syria have been conflictory since the creation of the Jewish state in 1948, although Tel Aviv and Damascus have recently moved to revive peace efforts through indirect talks mediated by Turkey.

But Al Jazeera's Jacky Rowland in Paris said that Assad went as far as referring to the predominantly Jewish state as "Israel" and not the "Zionist entity" for the first time in public, hinting that Syria was willing to engage in a form of dialogue with its Middle East neighbour.

"The Syrian president's willingness to build ties with Lebanon, which have been strained for so long, is music to French ears,” she said.

"This is also something that Sarkozy will take credit for, and essentially see this as a diplomatic breakthrough."

The UK, Germany and the US welcomed the decision by Lebanon and Syria to open diplomatic relations, but a US state department spokesman said Washington would "continue to limit [US] diplomatic engagement unless Syria takes concrete actions to end its destabilising tactics in the region".

Despite the three-decade military presence in its smaller neighbour, which ended in 2005, Syria has never had diplomatic relations with Lebanon, which it has long regarded as part of its own territory wrongly separated by ex-colonial power France.

Ahmed Fatfat, youth and sports minister in the former Lebanese government, said: "We've been demanding the opening of embassies for a long time and it is something that should have happened years ago.

"Syria needs to start conducting its relations with Lebanon on a state-to-state basis and can no longer treat us as a fiefdom."

Palestinian cause

Sarkozy said the goal of the summit was "to learn how to love each other" [Reuters]
Amr Mussa, chief of the Arab League, which could be granted observer status in the union, said on Friday that the new union must not ignore the Palestinian issue.

"When the UFM (Union of the Mediterranean) examines the situation in the Mediterranean region, it must not ignore the Palestinian cause."

Abbas' spokesman Nabil Abu Rudeina said Abbas would raise the question of "colonies" on Palestinian territory, and call once more for Israel to "end them", particularly in east Jerusalem.

"No issue has been settled, hence the necessity of greater efforts from the US administration and from the international community to avoid the region falling into uncontrollable chaos," Abu Rudeina said.