Germany warns Serbia on EU accession prospects

He added: "It is important for both sides to maintain the dialogue. A result would be useful for both sides, also in view of the next steps in Serbia's EU rapprochement."

He spoke following cranky talks between Kosovar and Serb leaders in Brussels on Tuesday.

The two sides are trying to agree on "normalisation of relations" in the wake of Kosovo's declaration of independence five years ago.

The big sticking point is what to do about north Kosovo.

The ethnic Serb enclave rejects Pristina's rule and its security services make it a no-go zone for Kosovar police.

Serbian Prime Minister Ivica Dacic told Kosovar Prime Minister Hashim Thaci on Tuesday that ethnic Serb enclaves should be governed by an autonomous Association of Serb Municipalities.

He said ethnic Serb security services could become part of normal Kosovo police if local Serb leaders get to nominate the Serb police chiefs.

But Thaci refused, citing Kosovo's constitution on territorial integrity.

The meeting lasted 12 hours.

At one point, Serbian deputy prime minister Aleksander Vucic started yelling at Thaci and offered to resign.

Dacic later told reporters "the atmosphere was a little tense … [but] there was a lot of progress."

Thaci told press: "I want to stress once again that the association of municipalities in the north will not have legislative or executive powers."

The event, chaired by EU foreign affairs chief Catherine Ashton, marked the end of a formal "EU-facilitated dialogue."

But Dacic and Thaci promised to consult with their national administrations and to report back in a few days.

Thaci added he is willing to meet Dacic "next week" if Serbia budges.

EU leaders will decide at a summit in June whether to open accession talks with Serbia.

But an earlier deadline is 16 April, when the European Commission is due to file a report on whether Serbia has done enough to merit the step.

Germany is the main decision maker on Western Balkan enlargement.

But other countries are also trying to shape events.

A UK government spokesman told EUobserver: "It’s now crucial that both sides make further progress, notably with regards to the dismantling of illegal Serbian structures in northern Kosovo.”

The US, which led a bombing campaign against Serbia in the Balkan wars, endorsed Thaci's point of view.

A spokesperson at the US mission to the EU said: "We encourage both sides to seize this extraordinary opportunity to reach an agreement that opens their respective paths to European integration."

They added: "The December 2012 conclusions of the European Council lay out what needs to happen in this respect."

The 11 December conclusions say that a north Kosovo solution must ensure "a single institutional and administrative set up within Kosovo."