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France and Libya will end their dispute over the 1989 bombing of a French UTA airliner on Friday with the signing of a $170 million compensation deal for families of the 170 killed in the attack.

The deal, clinched on Thursday by family representatives and Libyan negotiators, falls well short of the $2.7 billion pay-out agreed by Libya last year for 270 victims of the 1988 bombing of a Pan Am airliner over Lockerbie, Scotland.

But French officials welcomed the compensation accord, which is to be signed in Paris at 10:00 a.m. (4 a.m. EST) on Friday.

They said the two countries would now seek to repair strained ties with a joint declaration on bilateral relations, also on Friday.

"It will be a roadmap relaunching relations between France and Libya," said an aide to Christian Poncelet, the president of France's upper house of parliament who on Thursday met visiting Libyan Foreign Minister Mohamed Abderrhmane Chalgam.

Chalgam is due to meet his French counterpart Dominique de Villepin for talks on Friday followed by a joint news conference due at 5:00 p.m. (11 a.m. EST).

France convicted six Libyans in absentia for the attack over the west African state of Niger. But Tripoli has always denied responsibility for the bombing and insisted it would not match the amount of the Lockerbie pay-out.

Since the Lockerbie deal, Libya has moved to improve ties with the West by pledging last month to scrap its banned arms programs. But France insisted the UTA settlement must be part of any full reconciliation.

In a New Year's speech to French diplomats, President Jacques Chirac said on Thursday a settlement of the UTA dispute would "allow Libya to reintegrate itself fully in cooperation initiatives between the two shores of the Mediterranean."

The $170 million is expected to be shared among families of victims of 17 nationalities, including Africans, Americans, Britons and Italians who were on board the UTA plane when it was bombed over the west African state of Niger.

Paris threatened last year to veto the lifting of U.N. sanctions on Libya after Tripoli agreed to pay $2.7 billion compensation for the bombing over Lockerbie, a deal that dwarfed the initial $34 million UTA settlement.

But it relented after Libya said it would increase compensation for the French airliner bombing, for which six Libyans were convicted in absentia by a French court.

Subsequent negotiations with a private fund run by Libyan leader Muammar Gaddafi's son have proved stickier than expected, with Libyan officials unveiling conditions for the payout.

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