By Oana Lungescu
BBC News, Brussels
Croatia is set to be the second ex-Yugoslav republic to join the EU
In just a few years, Croatia could be celebrating its EU accession - no mean feat for a nation involved in the bloody Balkan wars less than two decades ago.
In a progress report the European Commission says this country of 4.4 million people "is expected to reach the final phase of accession negotiations by the end of 2009, if it has taken the necessary preparatory steps".
For the first time, the Commission proposes a detailed timetable for agreeing terms in all the 35 areas covered by membership talks by the second half of next year.
If both Croatia and the EU stick to it, the country could join the bloc by 2011, after the ratification of its accession treaty by all 27 EU member states, a process expected to take around 18 months.
But that's a big if. The timetable is "indicative and conditional" and the report stresses that significant challenges remain for Croatia.
The Commission highlights the fight against corruption, continued discrimination and hostility towards Serbs and attacks against journalists, particularly those working on corruption cases and organised crime.
Just weeks ago, a car bomb killed the newspaper editor Ivo Pukanic and a colleague. In another recent high-profile murder, the daughter of a prominent lawyer was gunned down in the Croatian capital Zagreb.
Signal for Balkans
Croatian police have arrested several people and say several other suspects are on the run.
Ethnic tensions have plagued Macedonia since independence in 1992
Croatia's chief EU negotiator Vladimir Drobnjak told the BBC the authorities had moved fast. "It took about a week for our police to get the first perpetrators and I think that our response has been sound, determined and efficient," Mr Drobnjak said.
He stressed that a green light to Croatia's accession would send a positive message "that hard work pays off" to the rest of the Balkans and beyond.
But Macedonia, another EU hopeful, got a red light this year. The report says the country "does not yet meet the political criteria" to start membership talks, after a parliamentary election in June this year was "marred by violent incidents and serious irregularities".
The European Commission also called on Turkey, which started membership talks in 2005 along with Croatia, to give "a new impetus... to reform, in order to strengthen democracy and human rights, to modernise and develop the country and to bring it closer to the EU".
But in the wake of the war in Georgia, it also highlights Turkey's increased significance for the EU's energy and regional security.
For Serbia, there is an amber light. Describing the arrest of the former Bosnian Serb leader Radovan Karadzic as "a major step forward," the report says "it should be possible" to grant Serbia the coveted EU candidate status next year - provided it presses on with reforms and fully co-operates with the UN war crimes tribunal.
France, backed by Germany, are already complaining. They say there can be no further enlargement until the EU's Lisbon Treaty - meant to prepare the bloc for new members, but rejected by Irish voters in June - is ratified.
"Without clarity on the Lisbon Treaty," a French diplomat told the BBC, any timetable for Croatia is just "an empty promise".
But others in the EU claim Croatia's accession could actually provide a solution to the problem. One influential source told the BBC that some of the key reforms envisaged by the Lisbon Treaty could be included in Croatia's accession treaty. That would leave advocates of enlargement such as the Irish, but also the Czechs and the Poles - who haven't ratified the Lisbon Treaty yet - with an awkward option: block Croatia or accept Lisbon.