End of a Crisis

The breakthrough deal was thrashed out between leaders of the pro-European Democratic Party, the moderate nationalist Democratic Party of Serbia (DSS), and the neo-liberal G17 Plus party.

President Boris Tadic's Democrats and the DSS party of Prime Minister Vojislav Kostunica had clashed earlier this week after DSS deputies helped to vote in an ultra-nationalist to one of the country's most powerful posts.

The election of acting Radicals party leader Tomislav Nikolic as parliamentary speaker raised alarm among Western leaders that Serbia was headed back to the isolation of the Slobodan Milosevic era.

The European Union condemned the election of Nikolic as a
return to "darker days" and urged Kostunica and Tadic to rise
above their differences for the good of the country.

Pressing for a new government deal ahead of a looming Tuesday deadline to avoid new elections, Tadic and Kostunica met with G17 Plus leader Mladjan Dinkic until 4:00 am on Friday until an agreement was reached, the reports said.

The talks continued later in the day to hammer out details and finalize the agreement, under which Kostunica would remain premier but give up some key security powers to Tadic's Democrats.

EU welcomes last-ditch deal

EU enlargement chief Olli Rehn welcomed the developments, saying such a government could open the way for Serbia to "immediately" resume European Union rapprochement talks.

"I have learned of good progress in forming a new reform- and Europe-oriented government in Serbia over the past 20 hours," Rehn said in a statement from the Belgrade office of the European Commission.

"I understand that this government would be founded on the principles of striving for EU integration, completing cooperation with the ICTY (International Criminal Tribunal for the Former Yugoslavia) and achieving further progress in economic reform."

"We in the EU would be very happy if Serbia would form a
government with European and democratic parties," German
Chancellor Angela Merkel said at a regional meeting in Zagreb.

"The U.S. welcomes a new Serbian government which does not
include the Radical Party," U.S. Undersecretary of State
Nicholas Burns said at the same meeting.

Brussels froze negotiations with Belgrade over a Stabilization and Association Agreement in May last year, chiefly because of the Kostunica government's failure to arrest former Bosnian Serb general Ratko Mladic.

Mladic, wanted over the Srebrenica massacre of 8,000 Muslim males at the end of Bosnia's 1992-1995 war, is widely believed to be hiding in Serbia.

A close call

In Jan. 21 elections, Nikolic's Radicals came first but fell short of a majority with 81 of parliament's 250 seats. They were trailed by the Democrats, the DSS and G17 Plus, which respectively won 64, 47 and 19 seats.

Since his election as speaker, the acting Radicals leader has made a series of inflammatory remarks, causing jitters in the region. On Friday, however, Nikolic told Tanjug news agency he would resign if parliament demanded such a move.

Before Nikolic's election, talks between the DSS and the Democrats had hit a wall over the distribution of security posts crucial to Serbia as it handles critical issues including the impending final status of its breakaway province of Kosovo and cooperation with the ICTY.

Kostunica's party had insisted on retaining control over the interior ministry and the police intelligence agency (BIA), which was rejected by the Democrats.

Division of power

On Friday, a Democratic Party source said parties had since agreed on most ministries and top security posts.Tadic would oversee security services as requested by EU foreign affairs chief Javier Solana earlier this week, the source told AFP.

His Democrats would control the defense ministry and military intelligence agency (VBA). The DSS's Dragan Jocic would remain interior minister, while an independent would be responsible for the BIA.

"Everyone has made some concessions, but I'm afraid we will all the feel consequences of the irresponsible behavior (of all parties) in the coming months, maybe even years," the source told AFP.

The parliament would probably be called for a session this weekend with a key debate and vote on the new cabinet to be held on Monday, said the source.