By Matt Robinson
BELGRADE (Reuters) - Prime Minister Ivica Dacic told Serbia on Saturday it had "practically" lost sovereignty over Kosovo, and said autonomy for ethnic Serbs living there was the most it could hope to salvage.
In some of the boldest remarks by a Serbian leader on Kosovo since NATO bombs wrested the former province from Belgrade's control in 1999, Dacic said Serbia could not afford to "keep its head in the sand".
"Serbian sovereignty over Kosovo is practically non-existent," he told parliament as lawmakers debated a resolution calling for autonomy for tens of thousands of ethnic Serbs still living in mainly Albanian Kosovo.
Dacic's government, like all others since the 1998-99 Kosovo war, has ruled out ever recognizing Kosovo, but he has been signaling a more pragmatic approach as Serbia seeks to start talks on joining the European Union.
Backed by the West, Kosovo declared independence from Serbia in 2008, nine years after a brutal Serbian counter-insurgency war forced NATO intervention to halt a Balkan bloodbath presided over by late Serb strongman Slobodan Milosevic.
More than 90 countries have recognized the young country, but it continues to be challenged by a de facto ethnic partition between the 90-percent Albanian majority and a small Serb enclave in the north, which is propped up by Serbia.
The EU, which made Serbia an official candidate for accession last year, is pressing Dacic's government to loosen its control over north Kosovo and establish functional, neighborly relations with its former province, even without recognizing it as independent.
"MYTHS AND FAIRYTALES"
EU foreign policy chief Catherine Ashton is chairing talks between Dacic and his Kosovo counterpart, former guerrilla commander Hashim Thaci, which resume on January 17 in Brussels.
Progress in those talks will decide whether the EU opens accession negotiations with Serbia. Croatia, another ex-Yugoslav state, becomes the bloc's 28th member in July, a sign for Serbians of just how far they have fallen behind.
The resolution calls for ethnic Serb autonomy within the legal framework of Kosovo and implies recognition of the authority of Thaci's government over the territory, albeit without explicit Serbian recognition of statehood.
Marko Prelec of the Brussels-based International Crisis Group think-tank said the resolution would mark a "milestone in Kosovo-Serbia relations".
"Belgrade never before accepted Pristina's jurisdiction over Serb-held northern Kosovo," he said, warning however that Kosovo was "solidly against" autonomy for ethnic Serbs. The prospect of coming under the authority of Pristina has angered hardline Kosovo Serb leaders, who have accused Belgrade of selling them out.
Kosovo has ruled out any special status for the mainly Serb north, but has been unable to bring the region under its control. The north currently operates in a legal limbo, financed and controlled in part from Belgrade.
Dacic said Serbs in Kosovo should have an autonomous court system, police, utilities management and other separate powers.
He said it was no good talking about Kosovo in terms of "myths and fairytales", in reference to the almost mythical status the region holds for many Serbs as the cradle of their nation and Orthodox faith.
"The people need a policy of results and responsibility, not a policy of honorable failure and battles that bring only defeat and collective victimization," said Dacic, who served as Milosevic's spokesman during the collapse of federal Yugoslavia.
"We have to create a strong basis to save something," Dacic said. "If Serbia keeps its head in the sand it will have nothing to negotiate about."
(Writing by Matt Robinson)