"It could go either way," US lawyer Michael Hausfeld said about the negotiations in Bonn that opened Tuesday but faltered with the victims' lawyers threatening to walk out over German industry's refusal to increase its pay out offer while the Germans blasted the demands as unrealistically high.

German government and industry have offered six billion marks ($3.17 billion) while the lawyers are asking for over 20 billion marks.

Hausfeld described Wednesday as a "make-or-break" day. He said that if the talks failed, "I'm sure there will be pressure from some organisations (in the US) for a boycott." Boycott threats were raised by Jewish groups in a successful effort to get Swiss banks to release money from dormant Jewish accounts from the Nazi era.

Switzerland's top banks agreedin August last year to pay 1.25 billion dollars over three years to US-based Jewish account holders who had sued the banks for failing to repay deposits made more than 50 years ago. At talks taking place in Germany and the US over compensation for up to two million former Nazi slaves, there are some 12 lawyers, almost all American, for the victims. Edward Fagan, who says he represents 76,000 former slaves, said he expected Wednesday "finally to hear a number" from the German side.

Fagan said the "10 to 12.5 billion dollar range (18.9 to 23.6 billion marks)" would be acceptable for a settlement. He said government and industry were saying in private they would offer up to 10 billion marks ($5.4 billion). This, he said, is a lot of money "but when you translate it to the number of people (former Nazi slaves) it comes out to 15,000 marks ($7,936) per person."

He said that the lawyers would first be meeting among themselves Wednesday, along with representatives of countries such as the Czech Republic, Israeland Russia where there are many former Nazi slaves. Then they would meet with the two government mediators in the talks, German Otto Lambsdorff and US Deputy Treasury Secretary Stuart Eizenstadt. Finally, there would be a meeting with representatives of the some 50 German firms, including industrial giant Daimler-Chrysler, who are ready to make compensation payments.

Fagan said: "I'm not the harbinger of doom but there is little hope with the numbers they keep talking about." He said the Germans have threatened to go ahead on their own and set up foundations to pay former Nazi slaves but "then they won't get legal closure and it will be full-scale war, with boycotts."

Fagan, who was a lawyer in the Swiss bank dispute, said: "This is worse, This isn't just relating to two Swiss banks. This is putting the entire German industry on trial." Seventeen out of the 50 German firms have publicly pledged four billion marks, with the government promising two billion marks.

The lawyers had Tuesday said they werewithdrawing an earlier demand for 23.1 billion marks ($12.5 billion), arguing on the basis of a new academic report that the amount owed to victims should be more than four times that. The German industry spokesman, Wolfgang Gibowski, said the firms were having trouble meeting even their previous offer of four billion marks and that the new demands for compensation were "completely unrealistic."

Up to two million surviving Nazi victims are claiming compensation from German firms, banks and insurance companies which employed or profited from employing forced and slave laborers during World War II. An estimated 900,000 were forced to work in German factories during World War II as virtual slaves.