The European Union is set to ban new loans to Belarus after reaching a deal on Friday for economic sanctions on Minsk as punishment for forcing down a flight to arrest a journalist, the Austrian foreign ministry and three diplomats said.

Broad economic sanctions would be the EU's strongest response yet to the forced landing of a Ryanair flight in May by Belarusian authorities to arrest an exiled dissident, a move the bloc's leaders have called state piracy.

Restrictions on the Belarusian financial sector, if agreed by EU governments at a political level, will include: a ban on new loans, a ban on EU investors from trading securities or buying short-term bonds and a ban on EU banks from providing investment services. EU export credits will also end.

Friday's agreement overcame objections from Austria, whose Raiffeisen Bank International (RBIV.VI) is a big player in Belarus through its Priorbank subsidiary.

EU leaders meet next Thursday for a scheduled summit. It was not yet clear if they will approve the deal agreed by expert officials.