Serbia and Kosovo have reached an agreement after months of talks brokered by the European Union over the normalisation of their relations.

The deal, reached on Friday, potentially sets the stage for Serbia to gain European Union membership in a major milestone in the region's recovery from the collapse of Yugoslavia.

Catherine Ashton, the EU's foreign policy head, said the prime ministers of both sides had initialled an agreement during talks in Brussels, at the culmination of six months of delicate negotiations and more than a decade of deep animosity since Kosovo broke away in war.

"The negotiations have concluded. The text has been initialled by both prime ministers," Ashton told reporters.

Serbian officials said the deal remained subject to approval by "state bodies" back in Belgrade.

"We will inform the EU by letter on Monday whether we accept the deal or not," Serbian Prime Minister Ivica Dacic told reporters. EU diplomats said there was very little chance of Serbia reversing course.

Tough tasks ahead

The pact is expected to tackle the ethnic partition of Kosovo since its 2008 declaration of independence from Serbia, and open the door to greater international integration of the young state, which Serbia does not recognise.

Serbia hopes it will be enough to win the green light on Monday from the EU's 27 members for the start of talks on its membership of the bloc, a process that could unlock the country's potential as the largest market in the former Yugoslavia.

Kosovo Prime Minister Hashim Thaci told reporters: "This agreement represents a new era ... This agreement will help us heal wounds of the past, if we have the wisdom and knowledge to implement it in practice."

Under the agreement, the north of Kosovo will be absorbed into the legal framework of the country but retain limited autonomy in areas of health, education, policing and courts.

Implementation will not be easy, in a region bristling with weapons and sectarian animosity.

In a sign of possible resistance to come, Serb municipal legislators in northern Kosovo demanded a referendum on whether Kosovo should be part of Serbia or Belgrade should accept the conditions set down by the EU to clinch accession talks.

Source: Reuters