Serbia EU Talks Start With Kosovo Ties at Center Stage

The European Union began entry talks with Serbia, demanding the country at the center of the continent’s bloodiest conflicts since World War II mend ties with Kosovo and improve norms on justice and civil liberties.

The Balkan state of 7.2 million people wants to be the third former Yugoslav republic in the 28-member EU, with the goal of finishing 35 negotiating areas, or chapters, by 2018 and joining by 2020. Neighboring Croatia, which entered the EU in July 2013, took eight years.

“Starting negotiations means entering into a very demanding phase,” said EU Enlargement Commissioner Stefan Fule at a Brussels briefing today with Serbia’s two top leaders. “Hard work will be needed and many challenges lie ahead.”

EU membership would solidify Serbia’s effort to overcome the isolation triggered by the collapse of Yugoslavia under strongman Slobodan Milosevic. It also had to drop resistance to EU demands to give up suspected war criminals, renounce claims on the former province of Kosovo and bring its courts, economy, and approach to personal freedoms in line with EU norms.

“Difficulties are ahead of us, but we are ready,” Serbian Deputy Prime Minister Aleksandar Vucic said at the news conference. “I’m convinced we can do it. We can do everything by 2018. Then it will be up to you gentlemen, up to the climate in Europe, whether you are ready to admit Serbia by 2020.”

Economic Gloom

Serbia is struggling to emerge from the effects of two recessions since 2009. Membership may help lift living standards, lure more foreign investment and create jobs in a country where almost a quarter of the workforce is unemployed.

The economy will grow 1.5 percent this year, according to the central bank. The government has stepped up plans to sell state companies, consolidate the deficit by 2016 and renew talks with the International Monetary Fund, which will send a mission to Belgrade on Feb. 26.

Investors have responded to the EU drive by pushing down the yield on the 2021 dollar bond to seven-month lows, according to data compiled by Bloomberg. Having fallen from a record-high 7.469 percent on Sept. 10, the yield was at 5.867 percent at 436 p.m. in Belgrade, while the dinar closed almost unchanged on the day at 115.6609 per euro.

While other ex-communist states that joined the EU have seen living standards surge since membership, Serbia has languished at about a third of the EU average over the last decade. Foreign direct investment, which totaled $24 billion from 1994 to 2012, is less than half of what neighboring Bulgaria, the EU’s poorest member, lured in the same period.

Courts, Corruption

Today’s press conference was dominated by Kosovo and will remain a key measuring stick for progress.

The North Atlantic Treaty Organization pushed Serb troops out of Kosovo, considered a religious and cultural heartland by many Serbs, 15 years ago, leading to a 2008 declaration of independence that Serbia has never recognized.

Serbia was also at the center of the 1990s Balkan wars that killed 140,000 people, displaced 4 million more and eventually split the federation into seven separate entities, including Kosovo.

Among other tasks, the country must overhaul a court system in which cases sometimes take as long as 20 years, compared with the EU average of eight months, Serb EU chief negotiator Tanja Miscevic said last week.

Serbia ranked 95th out of 178 countries according to the 2014 Index of Economic Freedom compiled by the U.S.-based Heritage Foundation. Unlike all 28 EU states, it fell in the “mostly unfree” category, with “widespread” graft.

‘Accession Timetable’

“The 2020 target copies the accession timeline of CEE countries, but obviously cannot be guaranteed,” Otilia Dhand, an analyst at political risk evaluator Teneo Intelligence, said in an e-mail. “The most controversial chapter is the one on relations with Kosovo, which will be the first to be screened.”

It must also tackle organized crime, a group of whom ordered the 2003 assassination of then-Prime Minister Zoran Djindjic, a pro-westerner who stood up against criminal gangs. While 50 percent of Serbs backed entry in the EU’s Autumn 2013 Eurobarometer poll, anti-accession sentiment simmers.

“Endless blackmail on Kosovo will follow, and the European Union will swallow our cultural, traditional and national values,” Vojislav Kostunica, a former president and prime minister, told Beta news agency in Belgrade.

Waning Enthusiasm

With enlargement enthusiasm waning among some EU members since the first expansion into ex-communist Europe in 2004, and stung by shortcomings in rule-of-law issues in members Bulgaria and Romania the commission has introduced new rules.

It will halt talks if Serbia “significantly lags behind progress in the negotiations overall, due to Serbia failing to act in good faith, in particular in the implementation of agreements reached between Serbia and Kosovo,” according to a negotiating framework presented by the commission today.

Support for expansion is also waning across the EU, with 52 percent against, compared with 37 percent for enlargement, according to the EU’s Autumn 2013 Eurobarometer survey. The U.K., which supported eastern European countries’ entry in 2004, is now pressing for curbs on migration from future members.

By starting talks, Serbia jumped ahead of former federation partner Macedonia, which has yet to begin and is behind Montenegro, which started negotiations in 2012.

To contact the reporters on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net; James G. Neuger in Brussels at jneuger@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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