(Updates with comment, markets in fifth-15th paragraphs.)
Oct. 12 (Bloomberg) -- The European Commission recommended Serbia win candidate status and promised European Union entry talks would start once the Balkan state makes “further progress” in ties with the breakaway province of Kosovo.
Serbia will join other former Yugoslav republics in moving toward the world’s largest trading bloc. Montenegro joins the Republic of Macedonia in being ready to start negotiations, while Croatia is set to join on July 1, 2013, the Brussels-based commission said today. Today’s recommendations need approval by all 27 EU members in December.
Once a pariah in the West under former President Slobodan Milosevic, Serbia has made progress in overhauling its economy and political landscape, the commission said. Improving relations in Kosovo, Serbia’s former province that declared independence in 2008, remains a priority.
“I recommend granting Serbia candidate status on the understanding that Serbia re-engages in the dialogue with Kosovo and is moving swiftly to the implementation in good faith of agreements reached to date,” Enlargement Commissioner Stefan Fule said today in Brussels. “The fact that this is the only priority we set is in itself a tribute to the reforms we have witnessed.”
President Boris Tadic said he was “proud” of the recommendation and reiterated Serbia’s determination to continue talks with Kosovo, while Deputy Prime Minister Bozidar Djelic called it the “best possible outcome” and Prime Minister Mirko Cvetkovic said it was “status neutral.”
Though Tadic ruled out accepting concessions that are counter to Serbia’s view of its “territorial integrity,” he said “it doesn’t mean it’s impossible to find a political solution to the crisis if the other side has will for that.”
The Serbian dinar gained 1 percent on the day to trade at 100.209 at 4:10 p.m. in Belgrade, according to Bloomberg data. The BELEX15 index of the most actively traded stock at the Belgrade Stock Exchange rose 0.81 percent on the day.
Serbia took a key step in becoming EU ready when it turned over the two last suspected war-crime fugitives to The Hague earlier this year. Still, the EU’s pressure for Belgrade to give up its claims for full control of Kosovo has taken its toll. EU leaders will meet Dec. 9 at a summit in Brussels.
Support in Serbia for membership fell to 46 percent in September from 53 percent in June, the lowest reading since polling on the subject was introduced in 2002, said Djelic on Sept. 30, without providing poll details.
EU ambassador to Serbia Vincent Degert, who called the opinion a “milestone,” said Serbia has a “few more weeks, a few more months” to continue talks with Kosovo and implement agreements that “have been achieved.”
Kosovo is recognized by 22 of 27 EU member states and Germany wants unconditional resumption of dialogue between the capital Belgrade and Kosovo. Talks on economic and political ties were halted after Kosovo’s authorities declared a trade war on Serbia and sent their police and customs staff to control two administrative checkpoints.
Serbs consider Kosovo, the home of their Orthodox church, as the cradle of their own culture and religion and reject any move to carve it from the nation.
In its report on Kosovo, the commission said “it is important that Kosovo launches a comprehensive agenda for the north,” referring to the territory majority populated by the Serbs, who do not accept Pristina authorities.
Kosovo itself has a list of problems to tackle, including the widening budget deficit, a weak rule of law, an unstable electricity supply, inadequate infrastructure and unskilled labor, all of which affect businesses in the country.
“Weak economic policy planning and implementation caused the derailment of the IMF standby agreement reached in 2010,” forcing the commission to halt the disbursement of cash under macro-financial assistance.
“The Kosovo government needs to take urgent steps to address the budgetary deficit,” it said.
The commission left out Bosnia, the only republic from the defunct communist Yugoslavia where a lack of functional institutions at all levels still hampers required changes needed for European integration. It also didn’t recommend the start of membership talks with Albania, which retains candidate status.
The progress report commended Serbia’s efforts to cooperate with the war crimes tribunal in The Hague, harmonize laws to meet EU standards and fight organized crime and corruption.
The transition to a market economy continues to make progress, while the issue of competitiveness remains a problem, the report said.
The Cabinet of Prime Minister Mirko Cvetkovic has set EU candidacy as the top goal in its four-year term that started in 2008. Negotiations between the EU and Croatia, which is due to sign the accession pact in December and become a member in July 2013, lasted six years.
--With assistance from Boris Cerni in Ljubljana; Editors: Douglas Lytle, James M. Gomez
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