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The government's top official handling the peace process held talks with Norwegian peace brokers in Spain, as the European Union weighed whether to place the LTTE on a list of banned terrorist organizations, officials said.

Peace Secretariat Chief Palitha Kohona flew to Barcelona on Tuesday for meetings with Jon Hanssen-Bauer, Norway's special envoy to Sri Lanka, senior officials involved in the peace process said.

The talks focused on a long-term strategy for Sri Lanka's future peace, rather than how to overcome the immediate crisis, the officials said.

The two had just concluded a meeting when the LTTE launched a massive attack on a vessel carrying 710 unarmed troops in the northern seas.

The EU, which imposed travel restrictions on the LTTE in September, a month after the assassination of oreign minister Mr. Lakshman Kadirgamar, was taking note of the latest surge in violence.

The EU has called the LTTE attack on the navy convoy "reckless," and a move that jeopardized future peace talks. Julian Wilson, EU ambassador in Sri Lanka, told The Sunday Times that including the LTTE on a list of banned terrorist organizations was "under close review."

A ban by the 25-member grouping will be a huge setback on the LTTE, which relies on the 200,000 strong Tamil diaspora in Europe for financial support.

The LTTE is already banned in the United States, Britain, India and more recently in Canada.

In Spain, Dr. Kohona and Mr. Hanssen-Bauer also discussed the co-chair meeting scheduled to be held at the end of this month in Tokyo. The meeting will clearly be one of the most important since the United States, Japan, the European Union and Norway threw their joint support behind Sri Lanka's quest for peace.Japanese envoy Yasushi Akashi described the up-coming meeting as a "soul searching," exercise.

He said the co-chair support was "on the premise that there was steady progress in the peace process." Although there have been "some achievements," there were "many setbacks."India has also been invited to participate in the Tokyo meeting.

Dr. Kohona is scheduled to return today.

The EU in a statement condemning the attack said: "The LTTE have committed gross violations of the Ceasefire Agreement (CFA) at sea in recent days. The attack on a troop carrier and the reported sinking of an accompanying navy vessel is the latest and most severe violation. The known presence of SLMM monitors on board that vessel adds to the seriousness of the violation.

"The claim by the LTTE that the SLMM has put its own monitors at risk by allowing them to travel on naval vessels is utterly unacceptable. This seeks to negate LTTE responsibility for the safety of monitors. This is a clear violation of the Ceasefire Agreement that requires all parties to take all measures to preserve the safety of the SLMM monitors".