EU renews bid to preserve Yugoslavia

EU hopes Djukanovic and Kostunica find an agreement

By Paul Anderson BBC correspondent in Belgrade

The European Union's foreign policy and security chief, Javier Solana, is in Belgrade in the latest stage of his diplomatic mission to rescue the Yugoslav federation from collapse.

Montenegrins are split on the issue of independence

His objective is to prevent Montenegro from holding a referendum on independence, and to find a formula to allow it and Serbia to live within a modernised federation.

This is Mr Solana's fifth trip to Yugoslavia in the past few months - a measure of the importance he attaches to holding the Yugoslav federation together.

Each time he has left with no agreement, only unspecified hints of progress.

Gap narrowing

This time, though, there are tangible signs the differences might be narrowing - perhaps, even in time to announce a breakthrough at this weekend's EU summit in Barcelona.

According to off-the-record briefings and media reports in Belgrade, the Yugoslav President, Vojislav Kostunica, and Montenegrin leader Milo Djukanovic agree on the bulk of joint competences within a revamped federation.

Most importantly, that covers military and foreign policy, and joint representation on the international stage.

The remaining areas of contention concern the economy and a joint currency.

Economis differences

Montenegro ditched the Yugoslav dinar for the German mark while Slobodan Milosevic was still in power. It now uses the euro.

Serbia still uses the dinar, though the euro is in wide circulation.

There is also the question of harmonising trade tariffs and taxation.

Until those problems are ironed out, any modernised union of states will be meaningless.

The EU wants an arrangement that sticks, at least for the time-being.

It believes the final disintegration of Yugoslavia could send the wrong signals to other, more volatile parts, like Kosovo and Bosnia.