Serbia must re-engage with Kosovo and improve relations in order to become a candidate for joining the European Union said the European Commission in a report released today.

Enlargement commissioner for the EU Stefan Fule said he recommended granting candidate status to Serbia "on the understanding that Serbia re-engages in the dialogue with Kosovo and is moving swiftly to the implementation in good faith of agreements reached to date."

Membership talks will commence when further steps are taken to normalise relations with Kosovo, Mr Fule added.

Serbia has handed over the last two war crimes fugitives for trial in The Hague, including former Serb commander General Ratko Mladic, whose arrest and transfer to the International Criminal Court was set as a prerequisite to forwarding Serbia’s EU membership bid.

Serbia does not recognise Kosovo’s unilateral declaration of independence and considers it to be a breakaway region.

Tensions are high in Northern Kosovo, which is dominated by Serbs and considered to be their “sacred heartland”.

The region is still effectively administered by Serbia, but reports in recent months indicate that senior Serb and some Kosovar officials have suggested handing over the region to Serbia and splitting Kosovo, however the EU and the US have ruled this solution out.