By Justyna Pawlak
LUXEMBOURG (Reuters) - The European Union should start membership talks with Serbia, the bloc's executive arm recommended on Monday, the last big hurdle the former pariah state had to pass before the EU's 27 governments rule on opening the negotiations in June.
Accession talks with Serbia could begin within the year, providing Belgrade makes progress with an historic accord struck last week to resolve relations with its former province of Kosovo. The process would help drive reform in the largest country to emerge from federal Yugoslavia, luring investors to its ailing economy.
EU governments will rule on the European Commission recommendation in late June, a few days before the bloc takes in Croatia, Serbia's neighbor and foe during the wars that led to the collapse of Yugoslavia in the 1990s.
In its recommendation, the European Commission said Belgrade had met a key condition of visible and sustainable improvement in relations with Kosovo, which broke away from Serbia in a war in 1999 and declared independence with Western backing in 2008.
Racing to clinch accession talks, Serbia last week agreed to cede its last foothold in Kosovo, in a pact aimed at ending the ethnic partition of the young country between its Albanian majority and a pocket of some 50,000 Serbs in the north.
The north Kosovo Serbs have threatened to resist integration with the rest of Kosovo, in a region bristling with weapons and deep animosity. Some 5,000 Serbs protested in the divided Kosovo town of Mitrovica on Monday.
But Western diplomats still want to see progress on the issue before June.
CROSSED THE RUBICON
"Implementation will not be entirely easy, but I think the Rubicon has been crossed," said Swedish Foreign Minister Carl Bildt, a former United Nations and EU envoy in the region. "There is no way back," he said.
Serbia's refusal to come to terms with the loss of its southern province has held back domestic reform, fuelled instability and slowed investment in arguably the most promising economy in the former Yugoslavia.
Last week's deal represents a sharp reversal of official Serbian policy, as the coalition government seeks the economic boost of closer EU ties. The Serbian government endorsed the plan on Monday morning, following Kosovo's parliament late on Sunday.
Serbs considers Kosovo the cradle of their nation and Orthodox Christian faith, but Belgrade lost control over the territory in 1999, when NATO carried out 11 weeks of air strikes to halt the killing and expulsion of Albanian civilians by Serbian forces waging a counter-insurgency campaign.
Kosovo has been recognized by more than 90 countries, including the United States and 22 of the EU's 27 members.
Serbia says it will never recognize Kosovo as sovereign, but last week agreed to cede its fragile control over the north Kosovo Serbs to the Kosovo authorities in Pristina, in exchange for limited autonomous powers. Serbia also pledged not to obstruct Kosovo's path to eventual EU membership.
"This is an historic agreement," said Dutch Foreign Minister Frans Timmermans. "It is another step towards lasting peace in the Balkans. I am very positive about this step," said.
Serbia is unlikely to join the EU before 2020.
Of its fellow ex-Yugoslav republics, Slovenia joined in 2004, Croatia follows on July 1 and tiny Montenegro began membership talks last year. Macedonia is a candidate, Bosnia has yet to apply and Kosovo is just starting out with a pre-accession Stabilization and Association Agreement.
(Additional reporting by Martin Santa, Adrian Croft and Matt Robinson in Belgrade; Writing by Matt Robinson; Editing by Jon Hemming)