By Matt Robinson and Aleksandar Vasovic
BELGRADE (Reuters) - Serbia has days to decide whether to accept a "catastrophic" plan to end the ethnic partition of its former Kosovo province or risk losing out on talks on joining the European Union, the country's powerful deputy prime minister said on Wednesday.
The warning followed marathon talks between the leaders of Serbia and Kosovo, their eighth encounter in almost as many months as the EU pushes to stabilize relations between the two and set Serbia on the path to membership of the bloc.
The Brussels meeting, mediated by EU foreign policy chief Catherine Ashton, ended without result, and Ashton gave both sides a "few days" to report back before she submits a progress report to the EU on April 16.
That report will likely decide whether the EU launches accession talks with Serbia in June - a milestone in the country's recovery from a decade of war and sanctions in the 1990s and a strong signal to investors eying the biggest economy in the former Yugoslavia.
"We're between a rock and a hard place," Deputy Prime Minister Aleksandar Vucic, leader of the largest party in Serbia's governing coalition, told state television.
"If we reject the plan, however bad it looks, that means closing the doors of Serbia to the rest of the world. It means less money for our budget and our economy," he said.
"On the other hand, if we accept something that we believe is bad, who knows how our people in Kosovo will accept that and how the rest of our people will react?"
Vucic described both options as "catastrophic", saying: "We'll have to choose the less bad option." He said Ashton wanted an answer by Tuesday, April 9.
More than a decade since NATO went to war against Serbia to halt a wave of ethnic cleansing in Kosovo, Belgrade is under intense pressure from the West to relinquish its fragile hold on a small, Serb-populated pocket in the north of its former province.
Kosovo declared independence in 2008 and has been recognized by more than 90 countries, including the United States and 22 of the EU's 27 members.
The stand-off over the Serb-dominated zone, which sometimes flares into violence, has frustrated NATO hopes of cutting back its now 6,000-strong peacekeeping force in Kosovo.
With Croatia about to become the second ex-Yugoslav republic to join the EU in July, the West wants to anchor Serbia in accession talks and cement stability in the region.
Desperate for the economic boost of closer EU ties, Serbia has offered to recognize the authority of Kosovo over the northern area, but wants autonomy for some 50,000 Serbs there.
Kosovo fears autonomy would only deepen the problem and leave the country ungovernable, and the talks are stuck on the powers the north would wield.
Kosovo has rejected Serbian demands that the north have executive powers and its own judiciary and police. Ashton said the gap between the two sides was "very narrow, but deep".
Kosovo Prime Minister Hashim Thaci mooted the possibility of another meeting next week, though Ashton said Tuesday's had been the last. "It's up to Serbia whether it wants to accept the document or not," Thaci told reporters in Pristina.
Analysts say failure to clinch EU accession talks could shatter Serbia's nine-month-old ruling coalition and force an early election, with Vucic's Serbian Progressive Party riding high in opinion polls.
It would also inflict more pain on the struggling Serbian economy, which contracted 1.7 percent in 2012.
Slovenia joined the EU in 2004. Montenegro, which left a state union with Serbia in 2006, has already begun accession talks and is next in line behind Croatia.
(Additional reporting by Adrian Croft in Brussels and Fatos Bytyci in Pristina; Writing by Matt Robinson; Editing by Andrew Heavens)