Work on the six-lane bridge across the Danube in Novi Sad, 70 kilometres (45 miles) north of the Yugoslav capital, Belgrade, is to begin in two months.

The reconstruction contract, worth $34m, was signed by Yugoslavia's Deputy Prime Minister, Miroljub Labus, and Richard Zink of the European Agency for Reconstruction.

This is a vital project not just for the Novi Sad region but for the whole of Serbia and for all the countries bordering the Danube

Richard Zink

Mr Labus, who is running for the Serbian presidency later this year, described the deal as a great day for Novi Sad.

The Sloboda bridge was one of three Novi Sad bridges destroyed during the Nato air raids.

Debris from the bridges blocked the river, cutting off a key freight route and causing heavy losses to shipping firms.

Some debris has still not been cleared, and will need to be moved before the new bridge project can go ahead. Officials hope the clearance can be completed in time for the project to start in September.

"This is a vital project not just for the Novi Sad region but for the whole of Serbia and for all the countries bordering the Danube," said Mr Zink.