LIBYA has agreed to set up a €2.4 billion fund for families of 270 people killed in the 1988 Pan Am bombing, the families' lawyers said, a move that could end UN sanctions and resolve an issue that has made the country an international pariah.

Libya is willing in principle to pay compensation to relatives of those killed in the Lockerbie bombing but is still considering the amount, a minister in Colonel Gaddafi’s government said today.

A Libyan businessman who helped arrange a £1.8bn (€2.8bn) compensation deal with the families of Pan Am 103 victims said today he was acting on behalf of the Libyan business sector that wants to see UN sanctions lifted.

Families of those killed when a bomb exploded aboard Pan Am Flight 103 over Lockerbie expressed emotions ranging from rage to scepticism to grudging acceptance of a €2.8bn settlement offer from Libya.

Negotiators are close to an agreement on the amount of compensation Libya will offer families of the 270 people killed in the Pan Am Flight 103 bombing over Lockerbie, a lawyer involved in the talks said today.