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Zimbabwe's President Robert Mugabe gestures during a rally in the capital Harare on March 2, 2011.PHILIMON BULAWAYO/Reuters

The European Union suspended most sanctions on Zimbabwe on Monday after voters there approved a new constitution paving the way for an election to decide whether President Robert Mugabe extends his 33-year rule.

The move is the most far-reaching step so far in the European Union's strategy of easing sanctions to encourage political and economic reform in Zimbabwe.

The southern African country has been governed by an uneasy coalition since Mugabe and Prime Minister Morgan Tsvangirai were forced into a power-sharing deal after disputed 2008 elections.

"The EU … has today agreed to immediately suspend the application of measures against 81 individuals and eight entities," EU foreign policy chief Catherine Ashton said in a statement.

Ten people, including Mugabe, and two companies, including state-run diamond mining company the Zimbabwe Mining Development Corporation (ZMDC), remain on the sanctions list, restricted by asset freezes and travel bans, an EU source said.

A number of "key decision makers" would remain under EU sanctions until peaceful, transparent and credible elections had been held, Ashton said.

Zimbabwe is expected to hold presidential and parliamentary elections in the second half of the year in what will be seen as a showdown between political rivals Mugabe and Tsvangirai.

The European Union first imposed sanctions on Zimbabwe in 2002, in protest against human rights abuses and violations of democracy under Mugabe's rule.

Rugare Gumbo, a spokesman for Mugabe's ZANU-PF party, said it was "completely unacceptable" for the European Union to partially lift sanctions.

"We want them unconditionally removed. There is no reason why some should be removed from the list while some remain. There is nothing we have done to deserve these illegal sanctions anyway," he said in Harare.

In a referendum on March 16, nearly 95 per cent of voters approved a new constitution that curbs presidential powers and paves the way for elections.

Ashton said the "peaceful, successful and credible" vote was a significant step towards implementing the 2008 power-sharing agreement.

She said however that the European Union was concerned about recent reports of intimidation and harassment of political activists.

Monitoring by domestic and international observers would boost the elections' credibilty, Ashton said, adding that the European Union was ready to provide any support for the elections that it was asked for.

At a meeting in Brussels last month, EU foreign ministers removed 21 people and one company from the sanctions list.

They also hammered out a compromise under which ZMDC, which operates five diamond mines in Zimbabwe's rich Marange fields, would be freed from sanctions within a month of peaceful and credible elections being held in Zimbabwe.

The new constitution sets a maximum of two five-year terms for the president. However, the limit will not apply retroactively, so Mugabe, 89, and in power since independence from Britain in 1980, could still theoretically rule for the next decade.

Although the referendum passed without incident and turnout was high, Mugabe detractors seized on the arrest of four staff members from Tsvangirai's party and leading human rights lawyer Beatrice Mtetwa as evidence that ZANU-PF is bent on intimidating rivals before the elections.