By Simon Bahceli and Michele Kambas

NICOSIA (Reuters) - Greek and Turkish Cypriots agreed on Friday to launch talks in September to re-unite their island, whose continuing division is damaging Turkey's chances of joining the EU.

Cyprus' President Demetris Christofias, the Greek Cypriot leader, and Turkish Cypriot leader Mehmet Ali Talat will start talks on September 3, ending a four-year impasse in efforts to bring the two communities together after decades of separation.

"The aim of the full-fledged negotiations is to find a mutually acceptable solution to the Cyprus problem which will safeguard the interests of Greek Cypriots and Turkish Cypriots," said Taye-Brook Zerihoun, head of the U.N. mission on Cyprus.

He said any agreement would be put to separate, simultaneous referendums in both communities.

Peace talks collapsed in 2004 when Greek Cypriots voted in a referendum to reject a U.N. blueprint for reunification that Turkey-backed Turkish Cypriots had accepted.

The deal to start talks was welcomed by Britain, Turkey and the European Union, which the Greek Cypriots joined in 2004.

"A unified and integrated Cyprus would benefit not only Cypriots themselves but the whole of the European Union," said EU Commission President Jose Manuel Barroso.

The political climate has changed since February, when moderate Christofias replaced Tassos Papadopoulos, a hardliner who led Greek Cypriot rejection of the earlier plan.

Talat, like Christofias a leftist, faces parliamentary elections by 2009 in his northern breakaway state, which is recognised only by Turkey, and presidential elections in 2010.

His party now holds a majority in the legislature but there has been growing discontent at a worsening economic outlook, and charges from opposition parties that he could concede too much to the Greek Cypriots.

"STEP FORWARD"

"I think this is a step forward, it's a positive development," Christofias told reporters. "There is a lot we agree on, a lot we disagree on, it's all a matter of a constructive stance of the sides."

Divided in a 1974 Turkish invasion triggered by a brief Athens-inspired coup, Cyprus has frustrated a long list of mediators attempting to reunite the island's two communities.

Hugh Pope, senior analyst for the International Crisis Group based in Istanbul, said the Cyprus conflict could not be more complicated than that in Northern Ireland.

"I don't see any insuperable obstacles for reunification of the island, and it's very important to realise that the mainstream Turkish decision makers are in favour of a fair deal on Cyprus," he told Reuters.

Turkey and Britain, which are guarantor powers of Cypriot sovereignty under the 1960 independence treaties of the former British colony, welcomed the decision for talks. Turkey has some 30,000 troops in northern Cyprus, and Britain two strategic military bases in the south.

"Turkey has supported the process from the beginning. We wanted the atmosphere that emerged after 2004's referendum to change," said a Turkish Foreign Ministry official.

"But it is necessary to be cautious. It remains to be seen how much the expectations of the Turkish Cypriots will be met."

Britain's Minister for Europe Jim Murphy said: "We look forward to the start of negotiations which, despite the challenges ahead, offer a real opportunity to solve the Cyprus problem for this and future generations."

NATO member Turkey's hopes of joining the EU partly depend on progress over Cyprus, which is represented in Brussels by the Greek Cypriots.

(Additional reporting by Zerin Elci in Ankara; writing by Michele Kambas; editing by Sami Aboudi)





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