The government meeting came after Polish President Aleksander Kwasniewski late on Monday said Poland was planning to send up to 200 soldiers to Iraq, affirming its pro-US stance on Iraq.

It also followed the weekend inking by the Polish and US governments of two of three parts of the deal, which is needed to bring the ex-communist country's air force up to NATO standards. The sales contract and financing terms of the purchase of 48 F16s were initialled.

Signalling tough talks ahead, Polish government spokesman Michal Tober told AFP on Tuesday that while what had been agreed so far was "quite satisfactory", Warsaw would hold out for maximum terms on the remaining part: a US compensatory investment package.

"We are trying to achieve as good results as possible. We are trying to get better and better conditions," Tober said.

Poland has expressed disappointment at the investment terms offered by Washington, which earlier had dangled the prospect of a 9.8-billion-dollar package. The Polish government has calculated a much lower value for the package -- at about six billion dollars -- and has also indicated it wants more high-technology transfers.

US aerospace giant Lockheed Martin beat European rivals on December 27 in a fiercely fought tender for eastern Europe's biggest military procurement deal.

Lockheed Martin defeated British-Swedish consortium BAE Systems-SAAB with its Jas-39 Gripen fighter planes and France's Dassault Aviation with its Mirage 2000-5s in the race.

The deal drew criticism from European Union countries, which thought a member-in-waiting should have given its business to an EU company. Poland is set to join the bloc with nine other countries on May 1, 2004.

The choice of the US plane was seen as boosting Poland's ties with the United States, with President George W. Bush declaring as war in Iraq loomed that Washington had "no better friend in Europe."

However, talks then hit trouble over the level of US investment.

Polish law requires that for every purchase deal there be compensatory, or offset, investment in the country equal to at least the amount of the purchase.

The overall contract will only be finally signed if the US and Poland agree on the offset package, and both sides have been divided on figures.

"It is a very important step, but the signature of the final accord will depend on the signature of the third agreement: on the programme of US compensatory investments, which are still being negotiatiated," Polish Defence Minister Jerzy Szmajdzinski said after the contract was signed Saturday.

He said it would take about 10 weeks for the talks to be wrapped up.

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