Tension between cultural andeconomic aims have become a serious complicating factor in film financepolicies in Europe, according to the European Audiovisual Observatory.

At a conference oninternational partnerships at Cannes on Sunday, experts said transnationalco-production was a clearly growing trend.

Accordingto its 2005 Focus report, US-launched films benefiting from European funding -like the Harry Potter films - accounted for 11.7% of admissions in Europe last year, up from8.1% in 2003.

But the head of theobservatory's markets and financing information department Andre Lange said therow in France over Jeunet's A Very Long Engagement had: "opened up a can of worms with numerousimplications, not just for the French system but also for European direct andindirect subsidy schemes."

Delegates to the conferencewere told that definitions of nationality were becoming ever more complex,making policies on financial support hugely complicated.

Head of the observatory'sdepartment for legal information Susanne Nikoltchev said the differing aims ofcultural protection and supporting the local industry led to a confusing arrayof complex points systems.

"It can be very hard to makea French film," she said.

But UK Film Councilconsultant Jonathan Davis said much of the debate about national funds missedthe key points in a way that could be damaging.

"A film like Motorcycle Diaries, for example, does so much to engage with our policyaims but we have structures that militate against showing it. It is crazy."