The European Commission has recommended that Serbia become a candidate for membership in the European Union, but will not open formal accession talks until Serbia does more to normalize relations with Kosovo.

In a report released Wednesday, the commission said Serbia had made progress in meeting political criteria related to stability of institutions that guarantee democracy, the rule of law, human rights, and the respect and protection of minorities. Serbia was also credited with establishing a functioning market economy and a degree of economic stability, but the report said more work is needed on restructuring the economy.

After arresting war crimes fugitive Ratko Mladic and extraditing him to the international war crimes tribunal in the Hague earlier this year, Serbia was expected to become a formal candidate for EU membership and hoped to receive a start date for membership talks. But the commission declined to take the next step of opening formal discussions until Serbia improves relations with Kosovo. Northern Kosovo has been plagued by ethnic conflict between the region's majority Serbs and ethnic Albanians.

Croatia has completed its negotiations and is set to become the EU's 28th member when it joins the grouping next summer.

The European Commission has also recommended that the EU open accession talks with Montenegro.