The European Union Tuesday welcomed Ethiopia's five-point peace proposal for resolving the border dispute between Ethiopia and Eritrea.

According to a press release here, EU said Ethiopia indicated its commitment to the boundary commission's decision by accepting the decision in principle.

Ethiopia and Eritrea fought a bloody border war between May 1998 and December 2000. As part of a 2000 agreement to end the war,the two countries agreed to set up an independent boundary commission.

Ethiopia has suspended its cooperation with the boundary commission over the last two years, saying that the decision was "unfair and illegal" act.

Ethiopia's main grudge was the boundary commission's ruling that Badme belongs to Eritrea, effectively stopping a demarcation exercise and keeping the exact location of the border in limbo.

However, Ethiopian Prime Minister Meles Zenawi said last Thursday his government has decided to accept the Ethio-Eritrea Boundary Commission decision "in principle."

Ethiopia's proposal calls for a dialogue on how to implement the boundary decision and the appointment of liaisons to help administer the border demarcation.

The EU looks forward to a constructive approach by Eritrea and the full implementation of the boundary decision by the two countries, the release said.

This is the only basis upon which a lasting peace can be secured, said the release, adding the EU reiterates its commitment to the peace process between Ethiopia and Eritrea, and emphasizes the normalization of relations between the Ethiopia and Eritrea will be an essential element for regional peace and security.