The report concluded that there has been "steady, though uneven progress [toward membership] in the Western Balkans and the region continues to face major challenges".
"Accession negotiations with Croatia are ... entering a decisive phase," the report said.
But it specified that "the country [must] maintain the necessary reform momentum" notably in justice matters, the fight against corruption and enabling Serb refugees who fled after the 1991-95 civil war to return home.
Positive assessment of Serbia
Meanwhile, Rehn signalled the European Commission's optimism regarding reforms in Serbia by saying he would initial a pre-membership accord with the Belgrade government.
The decision was made after a positive assessment of Serbia's co-operation with the international war crimes tribunal.
|"Of course |
this is encouragement for Serbia to move on the European track, leave its nationalist past behind and approach its European future"
European enlargement commissioner
Speaking to Al Jazeera, Rehn said: "We have seen intensified co-operation from Serbia in the search for fugitives and in providing access to documents."
Earlier he had said that he was prepared to take the step after talks with Carla del Ponte, the chief prosecutor at the International Criminal Tribunal for former Yugoslavia, based in the Netherlands.
The move means nothing in legal terms but would be a political gesture toward Serbia that could prove useful amid an international dispute over the future of its southern province of Kosovo.
"This marks a real turning point for Serbia," the enlargement chief said, noting that all other candidate nations already have such accords.
"Of course this is encouragement for Serbia to move on the European track, leave its nationalist past behind and approach its European future," he said.
In 2004, the EU's single largest expansion move, the bloc grew to 25 members absorbing Malta, Cyprus, Slovenia and eight east European nations. Romania and Bulgaria joined this year.
Except for Albania and Macedonia, all other nations of the western Balkans were embroiled in a series of conflicts following the collapse of the Yugoslav federation in 1991.
About 140,000 people perished in those conflicts.
Turkey's membership bid
The European Commission also released its report on Turkey, another EU hopeful, on Tuesday.
Turkey must improve minority rights, enhance freedom of expression and religion and press ahead with other crucial reforms for its membership bid to accelerate, the report said.
The EU report said the pace of reform in
Turkey had "slowed" [AFP]
It said the pace of reforms "has slowed down" since Turkey's membership negotiations opened two years ago, and "significant further efforts are needed" in crucial areas.
The EU executive also repeated that Ankara must normalise its relations with EU member Cyprus and honor a 2005 pact to open its ports and airports to the island republic.
The assessment received a strong reaction from Ankara, which urged EU countries not to impede Turkey's membership bid with what it called "obstacles that are not related" to the process.
The EU is particularly concerned about Article 301 of the Turkish penal code, which makes it a crime to insult Turkish identity or the country's institutions.
"It's important for Turkey to get rid of 301 by reforming it - moving forward in its reforms," Rehn said.
"I would not like to see any new excuses over not doing it."
The EU is also not expected to look favourably on a threatened incursion by Turkey into northern Iraq.
But questioned on the issue, Rehn told Al Jazeera it was "better not to speculate on something that has not happened".
Talks over Turkey's membership bid stalled last year over Ankara's refusal to open its ports to trade with Cyprus, an EU member since 2004.