Observes European agreement (4)
I believe the answer is:
eyes
'observes' is the definition.
(I've seen this before)
'european agreement' is the wordplay.
'european' becomes 'e' (abbreviation e.g. EU).
'agreement' becomes 'yes'.
'e'+'yes'='EYES'
(Other definitions for eyes that I've seen before include "Storm centres" , "Poetically, they're the windows of the soul" , "Narrowly watches" , "They're said to be the mirrors of the soul" , "Are they made to suggest possible date" .)