By Daniel Flynn

DAKAR, Dec 14 (Reuters) - EU peacekeepers bound for Central African Republic could help it break out of a vortex of civil war and poverty if their deployment is accompanied by an aid strategy including military reform, a report said on Friday.

The study by Crisis Group, released ahead of the arrival of the European troops early next year, said the force could be a catalyst for recovery in the landlocked former French colony, which has been trapped in a vicious circle of corruption, rebellion and economic collapse for decades.

The Brussels-based think tank said the country of 4 million people, roughly the size of France, was a "phantom state", where government institutions had stopped working outside the capital Bangui while bandits and warring factions terrorise the north.

President Francois Bozize, installed in 2003 by France and Chad, has lost control of the situation, Crisis Group said.

"This might be the last chance for Central African Republic to break out of its phantom status before any pretence of independence and sovereignty disappears," Francois Grignon, Crisis Group's Africa Program Director, said.

France won backing earlier this year from the United Nations for the European Union peace force, which is aimed at stemming the spillover into eastern Chad and northeastern Central African Republic of the war in Sudan's Darfur region.

Crisis Group urged the EU force, which will be mainly composed of French troops, to undertake reform of the Central African Republic's military. The security forces are blamed for rights abuses in the remote northeast, a stronghold of former President Ange-Felix Patasse who was toppled by Bozize.

Rights groups say hundreds of civilians have been executed and at least 100,000 people have fled their villages to go into hiding in the region's forests and bush.

Crisis Group urged the EU peacekeeping force, which will mainly deploy in eastern Chad, not to act as a cover for French political meddling in its former colonial territories.

French special forces backed by helicopters and fighter jets intervened last year to dislodge rebels who seized a swathe of northeastern Central African Republic around the town of Birao.

During the last decade, the diamond- and uranium-rich country has suffered 11 mutinies or attempted coups. It remains one of the poorest countries in the world, with per capita annual income of $260, according to the World Bank. (Editing by Pascal Fletcher)

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