Ukraine still welcome to sign EU deal: Merkel

German Chancellor Angela Merkel has said Ukraine still has a chance to seek a trade pact with the European Union, but she had no hope it would happen this time.

Merkel said on Thursday that "the door was still open" for Kiev, despite the Ukrainian government's rejection of the EU deal to avoid pressure from Russia, which has been seeking to keep the former Soviet state within its sphere of influence.

The deal was expected to be signed later on Thursday in the Lithuanian capital of Vilnius where EU leaders were holding a summit with countries of Eastern Europe and southern Caucasus.

Ukraine's President Viktor Yanukovich flew into Vilnius in time for a dinner in honour of the Eastern Partnership, the EU's four-year-old outreach programme for former Soviet republics.

EU enlargement commissioner Stefan Fuele said on Thursday Ukraine's decision to walk away from the agreement could imperil its future.

It was never a bazaar for billions. It was a question of giving Ukraine and the Ukrainian economy access to the largest integrated economic market in the world, Carl Bildt, Swedish foreign minister

"The Ukrainian economy needs huge investments, but these are not costs. They represent future income, more growth, more jobs and more wealth," said Fuele, disputing Ukraine's estimates that upgrading its economic base to European standards would cost $20bn a year.

"The only costs that I can see are the costs of inaction allowing more stagnation of the economy and risking the economic future and health of the country," he told a business forum in Vilnius, adding the EU offer remained on the table.

'Candy in a pretty wrapper'

Yanukovich himself set the scene for a chilly reception by dismissing the EU's trade offer as "humiliating". The 600m euros ($800m), or so, of support on offer was "candy in a pretty wrapper", he said.

But his presence at the EU gathering - without signing the agreement - indicates he does not want to burn his bridges with the EU and leave his country's economic future solely to Russia, which wants Kiev to join a Moscow-led trade bloc. His government says the suspension of the EU deal marks only a "pause" in moves to integrate Ukraine into Europe's mainstream.

The EU side, however, said there was no readiness to enter into a geo-political bargaining game over Ukraine, likely a reference to possible increased financial aid.

"It was never a bazaar for billions. It was a question of giving Ukraine and the Ukrainian economy access to the largest integrated economic market in the world," said Swedish Foreign Minister Carl Bildt, who warned that Yanukovich's decision to abandon the EU deal left it vulnerable to pressure.

It is not clear what Russian President Vladimir Putin did to get Yanukovich to shift position, but diplomats in Brussels, Kiev and Moscow have suggested Russia will give Ukraine a more favourable gas-supply deal and better terms on repaying 1.3bn euros of debt.

The EU will initial association agreements with two other ex-Soviet republics, Georgia and Moldova, putting them on track to sign formally in around a year. A visa agreement with Azerbaijan will also be signed.