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The EU's executive Commission says the plan will cut prices to a quarter or a fifth of what EU citizens now pay for calls back home from other member states.

The price caps are part of a push by the Union to show it can bring real benefits to its 490 million citizens, many of whom complain Brussels is too remote from their daily lives.

In the first year, the EU-wide tariff would be set at 49 euro cents a minute for making calls abroad and 24 cents for receiving them. It would fall to 46 and 22 cents in the second year and 43 and 19 cents in the third, respectively.

The caps would then lapse unless reaffirmed by EU states and the bloc's assembly.

'Consumers will save quite a bit of money,' said Martin

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Schulz, leader of the Socialist MEPs, the second-largest group in the EU Parliament.

Paul Ruebig, the conservative MEP who led the assembly's tough negotiations with EU states on the caps, said people would stop fearing that they would pay more for their phone bills than for their hotels when going on holidays.

The price caps will probably not take effect before many of the EU's 150 million mobile phone users head abroad for peak summer holidays. An EU diplomat said member state governments are not expected to give the required green light until July.

Once that happens, mobile operators will have one month to offer the price cap to customers and another month to activate it when accepted. The cap will be automatic for customers who have not replied two months after the offer is made.

However, customers already benefiting from specific roaming tariffs or packages would not be switched automatically.

Big operators said the deal would curb competition in roaming, a sector worth 8.5 billion euros in 2005, but their competitors said they could live with the price caps. Many operators have already cut roaming fees ahead of the new rules.

The price limits will apply only to cross-border calls made or received in any of the 27 member states, but not when travelling outside the EU.