BRUSSELS, Nov 6 (Reuters) The European Union agreed to initial the pact representing Serbia's first step on the road to membership today but said it would hold off fully endorsing it until Belgrade brings its war crimes suspects to justice.
EU officials hope the move will help keep Serbia's EU aspirations on track during the show-down over the breakaway Serb province of Kosovo, whose independence claim many Western observers fear could plunge the region into instability.
Presenting a report on patchy reform efforts by Western Balkans EU hopefuls, Enlargement Commissioner Olli Rehn said he would initial a so-called Stabilisation and Association Agreement (SAA) with Belgrade tomorrow.
He said he expected the deal, the first rung on the long ladder to membership, to be formally signed next year, but only if Serbia works with the UN war crimes tribunal in The Hague.
''This marks a real turning point for Serbia,'' Rehn told a news conference. ''Now Serbia has to go the last mile and achieve full cooperation.'' The tribunal says Belgrade must arrest and hand over suspects such as Bosnia Serb wartime commander Ratko Mladic, who is sought on genocide charges.
Rehn said he chose to initial Serbia's SAA after UN chief war crimes prosecutor Carla Del Ponte noted better access to documents and more will by the new government to make arrests.
Serbian Prime Minister Vojislav Kostunica told the state news agency Tanjug the move showed Belgrade ''can at the same time successfully handle European integration ... and defend the territorial integrity and sovereignty of the country''.
While EU officials want to avoid having an isolated and disgruntled Serbia on their doorstep, they deny any link between its membership drive and efforts to resolve Kosovo's fate.
Serbian Economy Minister Mladjan Dinkic said he expected Serbia to be recognised as a formal candidate by the end of 2008 -- an ambitious target given established EU procedures.
''We have prepared everything, and it just was a matter of the day when the initialling takes place,'' he told Reuters.
CORRUPTION RIFE Rehn said he also expected to sign an SAA with Bosnia next year. That country's membership drive has stalled over its failure to create a unified state-level police force.
The commissioner said there had been mixed progress in the Western Balkans. He said corruption remained a serious problem across the region -- notably in Kosovo -- and underlined the need for better governance in Macedonia, Albania and Montenegro.
Only Croatia was seen having a realistic chance of entering the bloc in the next five years, with membership for most of the others seen sometime between 2012-15 or later.
''The region as a whole needs to move forward in building modern democracies and further develop a political culture of dialogue and tolerance,'' Rehn said.
Osman Topcagic, head of Bosnia's European Integrations Directorate, said his country had not made much progress.
''Instead of focusing on reforms, the politicians are focusing on other issues,'' he told Reuters of uncertainty which grew last week when Nikola Spiric resigned as prime minister.
Rehn said membership negotiations with Croatia had reached cruising speed and were entering a decisive phase, showing the region that the prospect of EU membership was a reality for all.
But he made no recommendation for when Macedonia, an official candidate since 2005, should open entry talks and called for officials there to jump start momentum on reforms.
REUTERS NC KP2347