The Guardian

John Carvel reports from Havana on the mutual advantages for Cuba and Brussels in better relations

Fidel Castro did not bat an eyelid when the European Commission's man in Havana came up to him at the end of an official dinner at the French embassy and pinned the European Union's 12 star badge to the lapel of his military uniform.

The Cuban president was making the most of an improving relationship with Brussels which may lead to substantial European funds to save his administration from the tightening grip of the economic blockade by the United States.

In Washington, Senator Jesse Helms, the chairman of the senate's foreign relations committee has introduced a bilt to intensify sanctions against all countries trading with Cuba. Its Draconian penalties are designed to stifle the Cuban economy and force the collapse of the 36 year old experiment in Caribbean communism.

But in Europe, companies and governments are responding to Dr Castro's partial economic liberalisation by promoting joint ventures to stimulate the Cuban economy. They want to avert a political earthquake which might send tremors through European dependecies and former colonies through the Caribbean.

The badge pinning incident happened during an official visit this week by Emma Bonino, the European commissioner for humanitarian aid. She inspected hospitals and have cooapsed without food and medicines from charities funded by an 8 million grant from Echo, the European Community Humanitarian Office.

Santiago Gomez-Reino, Echo's director, declared its Cuban programme one of the most effective and efficient in its world wide relief operations. Ms Bonino is almost certain to recommend a 20 per cent increase in the grant. "I am proud of our programme", she said.

Although this humanitarian support is aimed at reducing the suffering caused by the US blockage, it does not imply overt political approval of the Castro administration.

Some EU member states are anxious that Echo is being allowed to run a 810 million overseas aid budget without proper oversight by national ministers. But there is no specific quarrel with the decision to help Cuba. Britain is giving 150,000 in direct bilateral aid to prevent hurricane flooding.

The EU, however, is poised to move on to the next, more controversial stage of a political operation agreement which would allow much larger sums to be channelled into the Cuban economy in long-term development aid and loans from the European Investment Bank.

Ms Bonino would not comment on these plans to avoid encroaching on the territory of other commissioners. But European diplomats in Havana predicted that there would be an initiative after Spain takes over the EU presidency in July.

Its prospects depend on whether the Cuban governement is prepared to couple its programme of economic reform with some political liberisation to satisfy the anxieties of the country's moderately critical Roman Catholic Church.

Ms Bonino's call for an immediate signal of intent appreared to have been met on Thesday when a French uman rights organisation annouced that the Cuban authorities has released six political prisoners.

Diplomates are also waiting to see the next stage of the reforms, which began in 1993 withthe legalisation of a private sector US dollar economy, decentralisation of the public sector, and measures to allow farmers to manage and finance their own produce.

Carlos Lage, the 44 year-old dynamic vice-president who is spearheading the reform programme, said the state sector would continue to be the main angine of the economy, but there would be an increasingly favourable environment for foreign investors.

His claim to be considered the leading politician in the generation after Dr Castro was consolidated at the weekend when he made the main speech at a rally to commemorate José Marti, Cuba's liberation hero, Mr Lage told journalists accompanying Ms Bonino that his government would soon publish a new investment law to stimulate small business and reassure foreign companies that they could repatriate profits from joint ventures they set up in Cuba.

Ernesto Meléndez, the foreign trade minister, said more than $1,5 billion of foreign capital had been invested in more than 200 joint ventures in the past two years.