France is preparing to bow to pressure from Brussels and agree to a partial liberalisation of its state-run betting monopolies.

In a sign that it is backing away from a confrontation with the European Commission, Paris has said that it is willing to legalise internet gambling on horse racing and football.

The move would give companies such as Sportingbet, the London-listed online bookmaker, a toehold in the €25 billion (£17.4 billion) annual Gallic gambling market.

Éric Woerth, the Budget Minister, is expected to unveil details of the liberalisation when he meets Charlie McCreevy, the Internal Market Commissioner, this month.

“The Government is not hostile to an opening up of sporting bets on the internet,” Mr Woerth said, signalling a U-turn in French policy.

Politicians and officials had argued that private sector betting could bankrupt the country’s horse racing industry, drive Gallic punters to addiction and serve as a front for money laundering.

Last year French authorities arrested two executives of bwin, the Austrian operator, when they arrived in France to sign a football sponsorship deal. Officials softened their stance after being told that France risked being taken to European Court of Justice.

The French Government may not go far enough to satisfy Mr McCreevy, who wants all operators with a licence from a European country to be allowed to offer bets in France. Mr Woerth is prepared to legalise only operators with a French licence.

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