EU industry ministers failed last night to agree on liberalising the postal system throughout the Union, a step that could cost An Post up to 45 per cent of its annual turnover.

Ireland's Minister for Public Enterprise, Ms O'Rourke, told the meeting in Brussels yesterday that, although Ireland favoured gradual liberalisation, too hasty a process would threaten the future of rural post offices and prevent An Post from competing fairly.

Ms O'Rourke last night expressed confidence that, despite yesterday's failed negotiations, a solution would be found that would protect Irish interests. The European Commission wanted the market to be opened up by 2003 for all letters and parcels that weigh more than 50g or costing more than two and a half times the price of a standard stamp to post. This would affect only 25 per cent of post office business but the Minister said it could cost An Post 130 million (€165 million) or 45 per cent of its annual revenue.

France, which holds the EU's rotating presidency, was pressing to limit the scope and slow the pace of liberalisation. Germany and Sweden, on the other hand, want the postal system to be opened up to competition as quickly as possible.

Responsibility for working out a compromise now passes to Sweden, which assumes the EU presidency on 1 January.