HIGHLIGHTS: Deal Reached After Intense U.S. Mediation||Island to Be Demilitarized with Forces of Neither Side Occupying It.||Moroccan & Spanish Foreign Ministers to Meet in Rabat Monday|| STORY: A Spanish garrison withdrew from a disputed islet after an accord brokered by Washington ended a row with Morocco that turned an obscure outcrop in the Mediterranean into a major international incident. (Read photo caption)

Witnesses said Spanish flags were removed shortly after Madrid announced a deal with Rabat to end the 10-day crisis late Saturday.

Helicopters withdrew Spanish soldiers who had earlier evicted a Moroccan contingent, escalating the storm.

A foreign ministry spokesman in Rabat reported the withdrawal of the Spanish forces from the islet, called Perejil in Spain and Leila in Morocco.

The July 11 arrival of a dozen Moroccan soldiers on the uninhabited rocky outcrop 200 yards (metres) off Morocco's Mediterranean shore caused shockwaves from Madrid to Brussels to Washington.

Saturday's deal followed intense US mediation. In Washington, US Secretary of State Colin Powell first announced the two sides had reached an "understanding."

In Madrid the Spanish government confirmed it had an agreement with Rabat that envisaged the return to the status quo existing before July.

From Spain's viewpoint this means the island will be demilitarised with forces of neither side occupying it.

Officially, Morocco sent its controversial landing party to set up an observation post as part of the fight against terrorism and clandestine emigration.

The Spanish military evicted the "invaders" six days later. The 75-strong Spanish force that took possession hauled down the flags and departed late Saturday.

The row is only the latest between Morocco and Spain, which have clashed over clandestine immigration, fishing rights and the disputed territory of Western Sahara.

Spain says the island has for 40 years had a status accepted by both Morocco and Spain whereby neither would occupy it. Madrid accused Morocco of unilaterally breaking the understanding.

In Washington Powell said: "The United States welcomes the understanding reached by Morocco and Spain over the island, following consultations by the United States with each side.

"In accordance with this understanding, the two sides have agreed to restore the situation regarding the island that existed prior to July 2002," he said.

Powell, who had made at least 14 phone calls to Spanish and Moroccan officials since Thursday, had been pushing for a deal in which both sides would remove from the island any "outposts, flags and/or symbols of sovereignty," according to US officials.

Thereafter the two countries would then negotiate a permanent settlement on the 33-acre (13.5-hectare) island, the officials said.

The Spanish and Moroccan foreign ministers, Ana Palacio and Mohammed Benaissa, were scheduled to meet Monday in Rabat.

The US stepped in to mediate after other major international actors lined up on either side of the dispute, with NATO and the European Union supporting Spain while the Arab League and the six-nation Gulf Cooperation Council backed Morocco's calls for Madrid to withdraw.

Morocco accused Spain of a "declaration of war" by sending in troops to evict the Moroccan soldiers.

PHOTO CAPTION

Spanish soldiers take a flag from a Moroccan who reached the disputed Perejil Island in an inflatable dingy, off Morocco's Mediterranean coast, July 20, 2002.. (Desmond Boylan/Reuters)