EU foreign ministers meeting in Brussels have formally warned Serbia that it must hand over indicted war criminals by the end of March or risk losing its EU association agreement.
Such an agreement, the first step on the road to EU membership, would give Serbia access to EU funds and co-operation programmes.
But it will be blocked unless Serbia hands former Bosnian Serb General Ratko Mladic over to the war crimes tribunal.
In another development, EU foreign ministers also agreed to release substantial aid to the Palestinians to prevent a financial crisis.
The move comes despite the appointment of a leader of the Islamist militant group, Hamas, as prime minister and the group's refusal to renounce violence or recognise the state of Israel.
The aid package amounts to €120 million.
