Progress in Yugoslav struggle

President Kostunica: New progress

Signs have emerged in Yugoslavia of a possible thaw in relations between the new government of President Vojislav Kostunica and the "old guard" of Slobodan Milosevic's Socialist Party.

Talks on Friday between the socialists - who control the parliament and government in Serbia - and the Democratic Opposition (DOS), resulted in an agreement in principle to hold elections on 24 December.

The discussions, from which the socialists at one stage withdrew, follow the federal election victory of Mr Kostunica and his accession to the federal presidency, ousting the Mr Milosevic.

Some reports said the two sides were now on track to resume full negotiations.

US decision to end the oil embargo has brought respite

The agreement to resume discussions came after some supporters of President Kostunica had set a Friday deadline for the resumption of the talks, threatening to take to the streets.

Sources in the new administration say the socialists may be offered the chance to share control of four key ministries.

The apparent progress in weaving together the old and new orders in Yugoslavia came amid continuing international support for Mr Kostunica.

The United States lifted its sanctions against Belgrade after President Clinton described the revolution as "one of the most hopeful developments in Europe since the fall of the Berlin Wall".

The will of the people will be respected if it means that Montenegro does not want to be part of a joint state

Yugoslav President Vojislav Kostunica

"It ended a dictatorship and it can liberate an entire region from the nagging fear that ethnic differences will again be exploited to start wars and shift borders," said Mr Clinton.

President Kostunica is likely to win further plaudits for suggesting that the republic of Montenegro - which has been straining towards independence - should be allowed to decide its future for itself.

"The will of the people will be respected and, I repeat, their will must be respected even if it means that Montenegro does not want to be part of a joint state," Mr Kostunica told Italian television.

Expelled

Despite the lifting of US and European Union sanctions, Yugoslavia still does not have automatic access to international funds, which it desperately needs to rebuild its shattered economy.

Access to the foreign money has been made conditional on progress in its transition to democracy.

The country was expelled from International Monetary Fund (IMF) in 1992 for its role in the Bosnian and Croatian wars, and it could still take some months for it to rejoin the IMF.

The European Union has promised a $173.2m emergency aid package to help tide the country over the winter.