Belgrade: Serbia began renewed talks with Kosovo on Wednesday as pressure builds for it to make a deal with the breakaway province and keep alive hope of starting European Union entry talks this year.

Prime Minister Ivica Dacic averted a negative verdict on Serbia’s EU readiness by consenting at the last minute to meet Kosovo Premier Hashim Thaci in Brussels in an EU-brokered reconciliation bid after Serbia rejected a mediated accord on 8 April. In return, EU enlargement commissioner Stefan Fule put off a report on Tuesday linked to allowing accession talks to begin in June.

Serbia, the largest ex-Yugoslav republic, has seen its EU entry bid stunted by a refusal to acknowledge Kosovo’s 2008 declaration of independence. The province was pried away from Serbia in NATO’s 1999 bombing campaign, the last of the wars that accompanied the breakup of Yugoslavia.

It seems like a very positive development, said Ivan Vejvoda, the Belgrade-based vice president of the US German Marshall Fund. There were indications even after the last talks failed, that the Serbian government would remain open for a new round. Of course, one has to be very cautious, but it’s still a very positive development.

EU foreign policy chief Catherine Ashton held separate initial meetings with Thaci and Dacic, before a joint session later, Ashton’s office said in an e-mailed statement.

‘Neighborly relations’

An agreement would not be only in the interest of Kosovo, but also in the interest of Serbia and the European Union, Thaci told reporters as he arrived for the talks. He said he hoped for good neighborly relations with Serbia, even as it refuses to recognize Kosovo as a state.

Uncertainty over a date to start talks have roiled markets in the Balkan nation. The dinar lost 0.35% to the euro on Tuesday to trade at 111.7470, its weakest level in a week. The yield on its dollar-denominated 2021 bond reached 5.1689%, its highest since 9 April.

Serbia probably needs to be careful not to overplay its hand as enlargement fatigue in the EU has risen in recent years, and particularly in Germany, Tim Ash, the London-based analyst at the Standard Bank Plc, wrote in a note to investors on Tuesday. Serbia lacks key allies in the EU, or at least those with as much leverage as Germany.

‘Good sign’

Fule, speaking to reporters in Strasbourg, France, on Tuesday called the hastily scheduled meeting between Serbia and Kosovo a good sign and put off a report that threatened to reject allowing Serbian entry talks to begin. The European Commission said in December that mending ties with Kosovo was key for Serbia to win a start date.

We are confident that this dialogue on the prime ministers’ level will result in a clear agreement, Fule said. We hope the two leaderships will seize the historical opportunity that lies before them in the very interest of their citizens.

The Serbian delegation is making the trip to Brussels in good faith and with good will, Dacic was quoted by the Serbian state-run newswire Tanjug as saying late on Tuesday.

Suzana Grubjesic, Serbia’s deputy prime minister for European integration who saw the EU report’s latest version, said it has a lot more praise than criticism and deals mostly with internal reforms that we have implemented for our sake.

I expect that resolution to be positive, she said in an e-mailed response to questions from Bloomberg, just like the draft which recommended that the European Commission open the process of accession talks as soon as possible.

Ethnic kin

Serbia wants Thaci to grant Serbs in Kosovo’s northern region decision-making rights on police and the judiciary and to pledge to keep the Kosovo army out of Serbian communities.

Kosovo can’t attain full international recognition as long as Serbia opposes it, which gives Serbia leverage in the talks, Serb President Tomislav Nikolic said in an interview broadcast on Belgrade-based B92 Television.

Clearly, there’s a limit to concessions we can make, Nikolic said, adding that a condition for survival of the Serb communities in northern Kosovo is that they remain free from Kosovo’s overwhelmingly ethnic Albanian authorities.

Starting entry talks with the EU is important for Serbia, but not a reason for accepting humiliation such as giving up on ethnic kin, Nikolic said.

Kosovo recognition

Serbia and Kosovo have been at loggerheads since the wars of the 1990s in the breakup of Yugoslavia. Kosovo is recognized by the US and 22 of the EU’s 27 members. Both need deeper EU ties after the civil wars stunted the region’s transition from communism.

Naz Masraff, a London-based analyst at Eurasia Group, said in an 10 April note to investors that he was still skeptical about talks beginning in the next two months.

Barring a last-minute turnaround in behind-the-scenes talks this week, it seems increasingly clear that Serbia’s prospects of securing a date in June for opening accession negotiation with the EU have largely diminished, he said. A date for Serbia, therefore, is unlikely before December at best. Bloomberg