Europe is set to announce it will slash its funding for Fiji's sugar industry, in a major new setback for the island nation's struggling economy.
The Fijilive website has reported that Europe would reduce promised aid payments from 217 million US dollars to 81 million US dollars.
The website said a decision to reduce the aid was made in December, in the weeks following the military coup in Fiji, and would be conveyed to the interim government.
But it said an initial payment of 4.9 million US dollars would go ahead in two months' time.
European authorities met their Fijian counterparts earlier this month to discuss the future of aid payments, given the political situation in Fiji.
At the conclusion of the talks Europe said Fiji's commitments, including a return to democracy by March 2009, would allow the country to avoid losing promised development aid.
Fiji's self-appointed Prime Minister, Commodore Frank Bainimarama says he hopes there will be a successful outcome to negotiations with the European Union.
Speaking at the opening day of the African Caribbean Pacific Ministerial meeting on sugar in Nadi, Commodore Bainimarama says failure to negotiate successfully would cripple Fiji's economy.