"In view of the direction already taken with regard to the reinforced system...for sheep and goats...it is highly desirable to move over time to electronic identification of bovine animals," a report by the European Commission said.

Electronic tagging will begin later this year for newborn sheep and goats and will become compulsory from 2008 for countries that have more than a certain number of animals.

Using electronic tags could help guard against the spread of disease and any abuse of subsidy payments based on numbers of animals, the report said, since they would enable records to be updated automatically and make fraud more difficult.

Movements of sheep infected with foot-and-mouth disease in Britain in 2001 were critical in the spread of the virus, which later hit Ireland, France and the Netherlands. Millions of animals were slaughtered to bring the outbreak under control.

Tests carried out between 1998 and 2002 show that three types of electronic identifier could be used on cattle: eartags, an injectable transponder, and an internal plastic or ceramic device known as a bolus.

A decision on whether electronic cattle tags should become compulsory across the EU would be taken after a three-year period when EU governments could choose whether to use them. In any case, animals would still have to be identified in at least two ways, said the report, obtained by Reuters. One would be a visible eartag while the other could be an electronic type.

"It has been demonstrated that the technology has been developed to the extent that it can be applied," it said.