PARIS, DEC. 6 -- The European allies today welcomed Iraqi President Saddam Hussein's declared intention to free all foreign hostages and expressed hope that their release will be followed soon by complete withdrawal of Iraqi troops from Kuwait and restoration of its legitimate government.

Spokesmen for European governments hailed the announcement as the result of unyielding opposition by the international community to Iraq's transgression of international law. But they stressed the need to sustain the pressure of a global consensus that Iraq must comply with all terms of the United Nations resolutions.

An official of the 16-nation North Atlantic Treaty Organization said that if Saddam "really does what he says he is going to do, it will be very good news." But he added that Iraq must fulfill the "other requirements" -- that is, withdrawal from Kuwait and restoration of its government -- laid out in the U.N. resolutions.

Officials in Britain, which has more hostages than any other Western country, cautiously welcomed the Iraqi announcement but warned it did not mean the gulf crisis was over. "It would be tremendous if all the hostages were home with their families by Christmas," Prime Minister John Major told BBC television.

"The point needs to be made," he added, that "they shouldn't be hostages in the first place, and Saddam Hussein has a good deal more to do than just release the hostages."

Nearly 1,200 Britons are being held or are in hiding in Iraq and Kuwait.

In the Italian parliament, legislators who were receiving a three-man delegation from Iraq's National Assembly broke into applause when the news was announced that Saddam would recommend to his compliant legislature that a travel ban be lifted for all foreigners. About 200 Italians are being held in Iraq.

Foreign Minister Gianni De Michelis said the Iraqi action provided "deep satisfaction for the Italian government and for me personally." Italy currently holds the rotating presidency of the European Community, and De Michelis expects to see his Iraqi counterpart, Tariq Aziz, in Rome after the Iraqi meets with President Bush in Washington.

De Michelis has struggled to maintain a united European front in the face of Iraq's efforts to split the international alliance by rewarding visiting dignitaries with the release of some foreign nationals.

Diplomatic sources said De Michelis, who will speak for all European Community states when he sees Aziz, would insist on full compliance with the U.N. resolutions.

But the sources said De Michelis would hold out the enticement that once Iraq fulfilled U.N. demands, there would be rapid progress toward an international conference to settle all Middle Eastern conflicts, including the Israeli-Palestinian problem and the Syrian presence in Lebanon.

French Foreign Minister Roland Dumas, who declared this week that such a conference would be "indispensable" once the gulf crisis is resolved, said the news out of Baghdad today "was a good sign." He added that "one must now await the execution of this decision."

All French hostages were released several weeks ago, when Saddam embarrassed the French government by saying he was taking the action in recognition of France's special efforts to achieve peace. France has vigorously denied having any secret contacts with Baghdad that led to the freedom of its hostages before others.

"France has never ceased demanding the liberation of all hostages," Dumas said today.Correspondent Glenn Frankel contributed to this report from London.