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Serbia-Kosovo Talks in Brussels End Without Deal, EU Says

April 3 (Bloomberg) -- Talks by Serbia and Kosovo on smoothing relations ended without agreement and left a “very narrow, but deep,” gap between the two sides, the European Union said.

Serbian Prime Minister Ivica Dacic and Kosovo Premier Hashim Thaci met yesterday in Brussels in the latest round of EU-sponsored talks in a session that lasted more than 12 hours, EU foreign policy chief Catherine Ashton said in a statement late yesterday.

“A number of proposals were put on the table, the gap between the two sides is very narrow, but deep,” said Ashton. The session was the last with EU mediation and the two sides “will now both go back and consult with their colleagues in the capitals and will let me know in the next few days of their decision.”

Serbia, which considers Kosovo to be the heart of its cultural history and refuses to recognize the breakaway province, is under pressure to come to political agreement with Pristina as the EU prepares to release a report this month on whether the Balkan nation qualifies to start EU member talks.

The dinar fell 0.16 percent against the euro by 2:46 p.m. in Belgrade to trade at 111.8132, according to data compiled by Bloomberg. The main stock market index of 15 most actively traded assets gained 0.74 percent, driven by rising shares of Naftna Industrija Srbije, which announced dividend payments for 2012, Milos Bijanic, the head of research unit at the Belgrade-based Sinteza Invest brokerage, said by phone.

Kosovar Serbs

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

“We currently have no agreement but we have some additional time to maybe find a solution, to maybe gather impressions after this difficult day,” Dacic told reporters in Brussels after the meeting.

Serbian politicians gathered around 1 p.m. in Belgrade to discuss the outcome of yesterday’s talks and they will “make tough decisions in the coming days and inform the public,” state-run Tanjug news agency said, citing the president’s foreign policy adviser, Marko Djuric.

The two sides have been at loggerheads since the wars of the 1990s that led to the breakup of the former Yugoslavia. Kosovo declared independence in 2008 and has been recognized by the U.S. and 22 of the EU’s 27 members.

Serbia must choose between “accepting a bad plan for the Serbian people in the north of Kosovo or refusing to sign an agreement with the West” that would “shut the door to the rest of the world,” Deputy Premier Aleksandar Vucic told the national broadcaster RTS. Serbia has between 72 and 96 hours to choose, he said.

Putin Talks

Serbian President Tomislav Nikolic spoke with Russian President Vladimir Putin on the phone today and they “discussed further developing bilateral cooperation, including in the energy, financial, and transport sectors, and exchanged views on current international issues,” according to the statement on Putin’s website.

Serbia will turn to Russia for financial assistance next week when Dacic travels to Moscow to sign a series of agreements, including tighter defense cooperation and $500 million in budget support, the government’s press office said in an e-mailed statement.

“Unfortunately, we still have some hesitance on the Serbian side,” which asked for “additional time for additional consultations,” said Thaci. For Kosovo, “the best solution would be to establish good neighborly relations, which would open up a new chapter.”

Dacic and Thaci met eight times over the past six months as part of “an intensive dialogue process” and “I think the elements for possible solutions are there,” Ashton’s spokeswoman, Maja Kocijancic, told reporters in Brussels today.

Kosovo Agreement

“We have to give both sides a chance to consult, to discuss, and we’ll take it from there,” Kocijancic said.

As Serbia prepares to move closer to the EU, Kosovo is in line for a Stabilization and Association Agreement, the first formal step toward membership in the 27-nation bloc. Both need deeper EU ties after the 1990s civil wars stunted the region’s transition from communism.

EU Drive

The biggest of the six former Yugoslav republics formally became a European Union candidate in March, joining other former federation partners in moving toward the world’s largest trading bloc. Slovenia has been an EU member since 2004 and Croatia will enter the EU in July. Montenegro has started membership talks and the Republic of Macedonia has been ready to start entry talks since 2009.

Failure to win talks would bring the Serbian government down and bring on fresh elections, said Bojan Djuric, who leads the opposition Liberal Democratic Party group in Parliament.

“The impression that there is no more European integration prompts fear and memories of the misery and the situation the country was in at the time of isolation,” said Djuric in Belgrade today. “There there are no investments and we will find it difficult to develop without EU assistance.”

To contact the reporters on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net; Jones Hayden in Brussels at jhayden1@bloomberg.net

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

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