EU ministers are expected to approve the European Commission’s recommendation on Madagascar next week.
Humanitarian aid – not directly involving coup leader Andry Rajoelina and his ministers – will continue.
The EU froze 600m euros (£501m; $738m) of development aid last year after President Marc Ravalomanana’s ousting.
Foreign donors and international mediators have called for the formation of a consensus government in Madagascar, to pave the way for fresh elections.
The EU, the biggest donor, has rejected Mr Rajoelina’s transition plan.
Last month, he announced he would not run in the elections.
Source: BBC
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