Serbia and Montenegro signed a deal today to reshape their Yugoslav federation.
It will comprise two semi-independent states, sharing a common defence and foreign policies, but with their own economies, currencies and customs systems.
Reporters saw Yugoslav President Mr Vojislav Kostunica, Serbian President Mr Zoran Djindjic, Montenegrin President Mr Milo Djukanovic and European Union (EU) foreign policy chief Mr Javier Solana sign what an official called an agreement in principle.
Late yesterday Serbian President Mr Zoran Djindjic said Montenegrin President Mr Milo Djukanovic had agreed to shelve independence plans for his small coastal republic for now.
The West hopes the move will head off Montenegrin independence and any more violent disintegration of the Balkan bloc.
The West fears Montenegrin independence would signal to ethnic Albanians in Kosovo and Macedonia and to Serbs in Bosnia that borders in the region can be redrawn, tempting them to seek separation by violence or other means.
Mr Djukanovic is eager not to endanger rapprochement with the West and economic aid, but he still needs to sell the deal to voters and a staunchly pro-independence party on whose support his minority government depends. It has demanded a referendum.