Yugoslav partners sign historic deal

The deal has been inked, but referendums can still be held

Serbia and Montenegro have signed an accord which will consign the name Yugoslavia to history and shelve any immediate plans for Montenegrin independence.

Under the deal, the two remaining partners in the Yugoslav Federation will become two semi-independent states, running their own economies, currencies and customs systems.

The new entity, to be called "Serbia and Montenegro", will however retain some federal institutions, like the presidency, and the defence and foreign ministries.

This is an extraordinary step forward in terms of stabilising the region

Javier Solana

The deal was reached under the mediation of the European Union, and signed by Yugoslav President Vojislav Kostunica, Montenegrin President Milo Djukanovic, Serbian Prime Minister Zoran Djindjic and EU foreign policy chief Javier Solana.

Hailed as a landmark accord, Montenegro has nonetheless reserved the right to take the issue of independence to a referendum after three years.

Western worries

But the deal will resolve any immediate demands by Montenegro for full independence from the dominant Serbian republic.

Key points

Yugoslavia renamed Serbia and Montenegro

Separate economies, currencies, and customs systems

Joint defence and foreign polices

President elected by joint parliament

One UN seat

Withdrawal option after three years

The West was keen to prevent Montenegro splitting away, fearing that this would send a signal to Albanians in Kosovo and Macedonia and Serbs in Bosnia that regional boundaries in the Balkans can be redrawn.

The EU stepped into discussions after talks between the two sides broke down last November. Both sides were told that reaching an agreement would assist their efforts to join the Western club.

"This is an extraordinary step forward in terms of stabilising the region," Mr Solana said, after flying from Belgrade to Barcelona, where the EU opens a two-day summit meeting on Friday.

He said Mr Kostunica and Mr Djukanovic would be joining the EU leaders in Barcelona for lunch.

Montenegro's campaign for independence began with the election in June 1998 of Mr Djukanovic, a leading opponent of former Yugoslav President Slobodan Milosevic.

Mr Djukanovic promised the tiny 650,000-strong Adriatic republic a referendum on the issue. Under Thursday's deal, both republics have the right to hold a referendum on independence after three years.

"The agreement does not jeopardise the basic right of every people to re-examine after a certain period their stand on the future of the state," he told reporters after the accord was signed.

Djukanovic still has to sell the deal to pro-independence groups

The president still however has to sell the deal back home in Montenegro, which is bitterly divided on the subject of independence. His minority government depends on a the support of a staunchly separatist party.

Providing the deal is passed by both the parliaments of both republics, as well as the federal assembly, the accord will be incorporated in new constitutions by June and elections for a new union parliament will be held in the autumn.

The deal is the latest alteration to the Yugoslav Federation, established by the Communist leader Josip Broz Tito in 1943.

Twelve years after his death in 1980, it began to unravel. Four republics declared independence during the 1990s, leaving the tiny Montenegro and Serbia as the only remaining partners in the once sprawling federation.

Slovenia and Macedonia managed to break away relatively peacefully, while declarations of independence in Bosnia and Croatia led to the worst violence and war crimes seen in Europe since World War II.