The Stabilization and Association Agreement (SAA), a precursor to full EU membership talks, was signed on Tuesday, April 29, by the EU foreign ministers and Serbia's Deputy Prime Minister Bozidar Djelic in the presence of the Serbian President, Boris Tadic.
Europe hopes that the deal will boost Serbia's pro-European parties ahead of an upcoming parliamentary vote.
But first, the ex-Yugoslav country will have to show it is fully cooperating with the International War Crimes Tribunal in The Hague. EU states will not ratify the pact, nor will Serbia get any trade or other benefits until this condition is met.
The SAA sent "a strong signal to Serbia to join us, to come to the EU," said Slovenian Foreign Minister Dimitrij Rupel, who chaired the council meeting of EU foreign ministers in Luxembourg where the decision was made.
Serbian Foreign Minister Vuk Jeremic, a pro-European member of the government, called the SAA agreement historic and said the decision signaled "an important political statement" which will open the doors to Serbia's EU membership.
"We believe we are irreversibly on the road to EU membership," he told reporters.
Serbia must hand over war criminals
The SAA helps aspiring EU candidates to meet the strict standards necessary for eventual membership in the bloc. Serbia will be asked to carry out various political, judicial and economic reforms.
In return, the EU will offer a series of benefits, including financial assistance, free trade deals and the relaxation of visa rules.
Tuesday's diplomatic breakthrough came after the Netherlands and Belgium said they would no longer oppose the Serbian SAA. Both countries had blocked the agreement because they felt Belgrade was not fully cooperating with the Hague Tribunal.
The Netherlands and Belgium agreed to sign the SAA on the condition that Serbia handed over all remaining war-crime suspects. The most notorious criminal is Ratko Mladic, the Bosnian-Serb general indicted for genocide and crimes against humanity. He is accused of orchestrating the 1995 Srebrenica massacre of 8,000 Bosniaks.
Mladic is believed to be hiding in Serbia.
"The Netherlands and Belgium have been very flexible and put forward several proposals, because we want to give the Serb people a signal that we care about them and that their future is in Europe," Dutch Foreign Minister Maxime Verhagen had said ahead of the Luxembourg meeting.
Elections unlikely to produce clear mandate
EU officials hope that the prompt signing of the SAA might give other pro-European parties an edge over ultra-nationalist rivals in the May 11 parliamentary elections.
Less than three months ago Serbians re-elected pro-European president Boris Tadic. Yet Tadic's Democratic Party has been unable to hold together a coalition in parliament, leading to snap elections.
While the ultra-nationalist Serbian Radical Party (SRS) was leading Tadic's Democratic Party slightly in the polls, neither party was expected to win a clear majority. It's thought that current Prime Minister Vojislav Kostunica will be the king maker in the upcoming elections.
Kostunica formed an uneasy coalition with Tadic's party, which collapsed in March. Kostunica's increasingly nationalistic Democratic Party of Serbia was enraged by what it sees as Tadic's acceptance of Kosovo's recent declaration of independence. Kosovo, a predominantly ethnic-Albanian province, split from Belgrade on Feb. 17.
Kostunica is nominally in favor of Serbia joining the EU, but only on the condition that the 27-member block recognizes Kosovo as part of Serbia.
Serbian parties could nix agreement
The SAA would become binding for Belgrade only once it is ratified by the new parliament.
Kostunica has condemned the agreement, saying that it recognizes Kosovo's independence and calling it "an act against the state and against the constitution."
Tadic disagreed, calling the SAA an "economic agreement which can not in any way endanger the sovereignty and territorial integrity of Serbia."
EU ministers also indicated they will offer an SAA to Bosnia-Herzegovina, which has been less controversial than the Serbia agreement.