* Mugabe says has positive talks on power-sharing deal

* First top-level EU visit to Zimbabwe in 7 years

* EU is main donor, despite sanctions

(Adds quotes from Tsvangirai, paragraphs 6-13)

By Nelson Banya

HARARE, Sept 12 (Reuters) - President Robert Mugabe welcomed the first top-level European Union delegation to visit Zimbabwe in seven years with "open arms" on Saturday and said talks on implementing a power-sharing deal went well.

Mugabe's change in tone suggested he may be more willing to cooperate with Western powers crucial to Zimbabwe's efforts to secure billions of dollars in aid and foreign investment.

"We welcome you with open arms," he said.

The visit by EU Aid and Development Commissioner Karel De Gucht and the Swedish EU presidency is the first since the EU began targeted sanctions in 2002 against members of Mugabe's government for human rights violations.

"We established a good rapport, it was a friendly meeting. Obviously they thought the Global Political Agreement was not working well," Mugabe, in power since independence from Britain in 1980, told reporters after the talks.

The EU delegation also met Mugabe's long-time foe Prime Minister Morgan Tsvangirai in Bulawayo, the second capital later on Saturday.

Tsvangirai, widely respected in Western circles for standing up to Mugabe, said his discussion with the EU focused on reforms and economic co-operation.

"We discussed ... issues around the constitutional reforms and other reforms, that's what the EU is legitimately concerned about," Tsvangirai said after meeting.

"We also raised the issue of economic co-operation."

Zimbabwe says it needs $10 billion in foreign reconstruction aid. Western nations are reluctant to release cash without further political and economic reform promised as part of the power-sharing deal, called the Global Political Agreement (GPA).

Tsvangirai added that the political agreement also came up for discussion. "We said that there are issues with the political agreement, regarding implementation," he said.

"However, there has been progress, but we are disappointed that the pace of implementation has been slow."

CHALLENGES

The GPA has been beset with problems as the parties accuse each other of not fully implementing the agreement, which Zimbabweans hoped would end daily hardships. Mugabe said after Saturday's talks that the deal was being implemented.

"We should acknowledge the progress made. But there are still matters outstanding. We discussed that openly," De Gucht said.

The EU remains the main overall donor to Zimbabwe, having provided 572 million euros ($829 million) in humanitarian aid to the country since 2002, despite the targeted sanctions.

To date, 203 people and 40 companies linked to the Mugabe government face travel and some financial restrictions within the 27-nation bloc.

Swedish International Development Minister Gunilla Carlsson said human rights and press freedom were discussed.

Mugabe, who has long held his Western foes responsible for Zimbabwe's economic decline, repeated his call for the sanctions to be lifted.

"They are causing suffering to the people right at the bottom," he said.

Asked if he would consider stepping down, Mugabe, 85, laughed and said: "You are asking a regime change question. I am still young." (Writing by Michael Georgy; Editing by Matthew Jones)

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