Slobodan Milosevic was removed from office in October 2000, after a historic election which he lost to the Democratic Opposition of Serbia (DOS) candidate Vojislav Kostunica. For the past eight years, Serbia has been muddling through its transition from being an international pariah state with a controlled economy—a society isolated from the rest of the world, burdened with its past and suffering from virulent nationalism—to a modern European state with a market economy and thriving democracy.

After 2000, when a loose coalition of democratic parties formed a new government, President Kostunica (Democratic Party of Serbia [DSS]) and Prime Minister Zoran Djindjic (Democratic Party [DS]) disagreed over the direction of reforms, the concept of the state and the nation's goals, which prevented the country from making quick progress. The assassination of Prime Minister Djindjic in 2003 further hindered the democratic transition. More troubling was that the lack of progress created de facto continuity with the policies of the Milosevic regime.

Competition between DSS and DS eventually gave way to powersharing and cohabitation, with Boris Tadic as president and Vojislav Kostunica as prime minister, since 2004. The parliamentary elections in early 2007 once again reflected the balance in the Serbian electorate, since neither the democratic nor the ethno-nationalist bloc won decisively. In the end, the government was formed by the DS-G17 and DSS-New Serbia (NS) with Kostunica in the position of the prime minister.

As has become the custom with every election since 2000, international attention again turned to Serbia last May to see if the country would finally decide to move full speed ahead toward Europe. Once again, the elections offered voters the option to choose between continuing with the nationalist fantasy or accepting reality and proceeding toward the European Union. The results proved Serbian voters to be almost equally divided yet again, and so Serbia now has a government that will pursue both goals at once, as irreconcilable as they may be.

Over the past several years, but especially in the last two, Kostunica has successfully made Kosovo the central issue of Serbian politics and has imposed his own hard-line position on his coalition partners, the media and the public. Long before Kosovo exploded, in his 1993 book The Wars are yet to Come, Nenad Canak wrote that Kosovo is a crucial element of the Serbian regime's strategy because there was no better way to ethnically homogenize Serbia, to legitimize that policy and to eliminate any opposition to it than giving it the label "defense of Kosovo." Strongly backed by Kostunica, this policy became part of the new Constitution, and a "national consensus" on Kosovo was formed and maintained based on his concept. It has become a dogma that few dare to challenge.

The continuous promotion of the so-called national project has provided fertile ground for the kind of conservative and xenophobic traditionalism advocated by the radical right-wing forces and the Serbian Orthodox Church. The "defense of Kosovo" platform has manifested itself in foreign policy in Serbia's anti-Western stance, particularly through anti-American and anti-NATO positions that purport to protect the sovereignty and territorial integrity of Serbia. This was coupled with a shift toward Russia and, to a lesser extent, China, India and the former non-aligned countries. The return to "patriotism" during the DS-DSS cohabitation period was not publicly opposed by the DS or President Tadic, though they did not participate in the campaigns and used softer tones.

Initially, the coalition government created in May 2007 survived Kosovo's declaration of independence last February and consensus was maintained despite friction between the parties over many issues. Based on a contingency plan prepared by the government (but never made public), Serbia acted quickly by recalling its ambassadors from the countries that recognized Kosovo, including the United States and some 20 EU members and banned government officials from all contact with diplomats from those countries. (Serbian ambassadors were returned to EU capitals in July, but other countries, including the US, still do not have an ambassador from Serbia.) Serbia began a vigorous diplomatic offensive to prevent additional countries from recognizing the new state and international organizations from including Kosovo as an independent state. Serbia's relationship with the EU as well as its status as a candidate for membership was in serious jeopardy. Prime Minister Kostunica wanted to put it on hold until the "EU explicitly recognizes sovereignty of Serbia over Kosovo." The Democratic Party and Tadic took the position that only a strong Serbia on its way to Europe can defend Kosovo and claimed that the two goals should be pursued in parallel. These differences eventually led Kostunica to bring the government down, expecting that an early parliamentary election—with Kosovo as the central issue—would strengthen his position and enable him to form a new government with the Radicals and the Socialists, relegating the DS to the opposition.

In a campaign full of vitriol, the dividing line was clearly drawn. The main competitors remained the Democratic Party and the Radical Party of Serbia (SRS), and polls showed the Radicals enjoying a slight lead. The presidential election held in February confirmed Tadic, who narrowly beat Tomislav Nikolic in the runoff election, 50.5 percent to 47.9 percent. Many feared that the result from the parliamentary elections would be different, since Kostunica and the Radicals urged Serbs to shun the EU because a "false state was created on the sacred soil of Serbia and Kosovo was stolen." EU accession is consistently supported by about two-thirds of Serbian citizens. But when asked whether they would accept giving away Kosovo as a price for EU membership, more than half say no.

President Tadic led the "For European Serbia" coalition, which combined the DS with a few small parties. The foundation of their platform was the slogan "Both Kosovo and Europe." Tadic's coalition and slogans were fully supported by the EU and the US, fearing that Serbian relations with the West would deteriorate further if Kostunica's nationalist bloc of Radicals and Socialists would win. In support of Tadic, the EU signed the Stabilization and Association Agreement with Serbia, allowing them to begin the accession process on the eve of elections. This was followed by a framework agreement between Crvena Zastava (formerly the main car producer in Yugoslavia) and the Italian company Fiat. Most local analysts agree that these two events, coupled with continued negotiations on facilitating the visa regime, added a few percentage points in support of Tadic's coalition.

Speculation over the composition of the new government had started even before the elections, when parties already began posturing and taking positions. While Kostunica made it clear that he would not accept a coalition with DS again (making the SRS and SPS his only potential partners), Tadic kept this options open despite harsh attacks from DSS and their strong anti-European rhetoric. There were some rumors about the possibility of a collation between the Democrats and the Socialists which, under the leadership of Ivica Dacic, formed a coalition with the Party of United Pensioners of Serbia (PUPS) and United Serbia (JS) to increase their chances and leverage.

The unexpected success of the Democratic Party, which won 102 seats in the 250-seat National Assembly, was immediately declared a great victory for the pro-European forces and created euphoria, not only in the DP and among its supporters, but also in the EU, the European capitals and in the United States. However, the numbers show a different picture. The democratic bloc (coalition For European Serbia, Liberal Democratic Party [LDP], parties of minorities) won 120 seats while the ethno-nationalist bloc (SRS, SPS, DSS) garnered 130. The last three began negotiations to form the new government followed by rumors that the Socialists were considering switching sides.

The results of the elections in the last four years show a growth of support for the democratic bloc (DS, G17, LDP, minorities) and incremental losses by the ethno-nationalist bloc (SRS, SPS, DSS). The December 2003 parliamentary elections gave the ethno-nationalist bloc 53.1 percent of the vote, while the democratic bloc won 32.1 percent. In January 2007, it was 51.3 percent to 37.4 percent, and last May's was the closest result ever, with 48.64 percent to 45.86 percent. Interestingly, the opposite trend can be seen in presidential elections, since Tadic won the July 2004 presidential elections against Nikolic 53.7 percent to 45 percent, but in February 2008 the results were 50.5 percent to 47.9 percent.

The proportional electoral system in Serbia has led to the establishment of what is often called a "partocracy." In this system, citizens vote for parties, which are not obliged to honor the candidate lists submitted at the time of elections. Therefore, parties can replace any of their MPs at their discretion, which ensures party loyalty and concentrates power in the hands of the party leaders.

Immediately after the elections, the media was filled with contradictory statements made by party representatives and rumors about party negotiations which added to the confusion over the results. In retrospect, it is obvious that the Democratic Party and the Socialist Party had reached an agreement early on, but both needed time to prepare their rank and file members—as well as the general public—for the new coalition. The platforms of both parties were very general regarding social and economic issues and were therefore found to be compatible. Also, both parties viewed Serbia's territorial integrity as a top priority for the country and EU accession also ranked high. Ironically, the national consensus on Kosovo imposed by Kostunica created the framework for the coalition between the Democrats with the Socialists, while a gradual shift in public attention away from Kosovo to the more pressing issues of the economy, unemployment and declining living standard—all linked to relations with the EU—helped the democratic bloc score better in the end and gave the Socialists the role of kingmaker, which had previously been held by Kostunica.

The new coalition government controls 128 of the 250 seats in Parliament. It has the support of 13 MPs from the LDP coalition and one Albanian for pro-European legislation and democratic reforms. The opposition now reduced to SRS and DSS-NS, has 108 MPs and, though it cannot prevent the adoption of government proposals, it can delay them through obstruction, as it has already done since the beginning of the new term. The new Prime Minister presented six key elements of the coalition's program to Parliament, including Serbia's European future; non-acceptance of the independence of Kosovo and Metohija; strengthening the economy; social responsibility; the struggle against organized crime and corruption; and respect for international law.

In terms of foreign policy priorities, the coalition lists EU as a top priority; Russia appears next, and then mentions strengthening its relations with the United States "with the goal that the largest power in the world…respects the interests of Serbia and the Serbian people to a higher degree." Mentioned also are China, India, the Mediterranean and the nonaligned countries. Regarding Kosovo, all coalition partners agreed that its independence will never be recognized and that all legal and diplomatic steps will be taken to keep it within Serbia. This will be done in cooperation with Russia and other states that are against or have not yet recognized Kosovo's independence. Related to the commitment of Serbia to strictly respect international law and its obligations and require the same from others, the ICTY is mentioned in one sentence that states that Serbia will insist that all crimes be treated equally and that there are no less valuable victims and privileged criminals (in reference to acquittals of Ramush Haradinaj and Naser Oric). The goals of the economic policy have been set very high and are coupled with a social policy that will require considerably higher government spending. The program is, however, not elaborated and strategies to achieve all of the goals mentioned remain to be developed.

Initially, the prospect of an odd coalition of DS and SPS with Tadic courting the Socialists was met with opposition. Nevertheless, strong support from the major Western countries (though discrete it became known) caused a "thundering silence" in the media and muted criticism along with some confusion in both parties and the general public. The formation of the government eight weeks after the elections was generally welcomed: tensions that had been felt in Serbia for months were finally relaxed. After a long crisis, voters desperately wanted to see a way out and were ready to accept almost anything. The acceptance of the new government seems to be growing over time. However, faith in the government platform requires a lot of wishful thinking. If disappointed once again, many voters may turn to the next option, and it may be far worse.

After a troubled experience with Kostunica and the snail speed at which reforms were made, many people took the position that his removal has been a success in itself. Though the platform of the Socialists matches Kostunica's when it comes to Kosovo, the EU and the West, most analysts notice that Ivica Dacic (an apprentice of Milosevic) is pragmatic and has realized the potential of this window of opportunity. He accepted the policy of "both, Kosovo and Europe" as the price for laundering his party's history and his own role in it. His party's associates have gained access to positions in the government and in profitable state-owned enterprises and now have a vested interest in keeping the government in place. His party gained control of the Ministry of Interior, which had been cleansed of Djindjic government appointees by Kostunica and filled with the old cadres and their young qualified relatives. A prominent military analyst has said that the "secret services are deeply privatized and owned by the parties (Blic, July 5, 2008). Tadic appointed Sasha Vukadinovic, an untainted professional (36 years old, formerly a public prosecutor) as the new director of the Security Information Agency.

Serbia was making some progress on its way toward the EU, though slow and uneven, until last February when Kostunica blocked it completely in response to the Kosovo declaration of independence. The May elections and the odd coalition government may look like more of the same, but there are major differences that allow for hope. Dacic and his Socialists do not have the power to assume the leading role in the government or bloc major decisions. After all, the government led by DS can survive their withdrawal since LDP can replace them. This seriously limits their capacity to block reforms. It also enhances the capacity of LDP to balance the influence of SPS and keep playing the role of the conscience of the Democratic Party.

The changes strengthen Tadic and establish in practice a semi-presidential system. He now has a real chance to lead Serbia into the future and the EU. Despite the inherent contradictions (democratic bloc in coalition with Milosevic's Socialist), the new government may prove to be long-lived and establish the stability that Serbia badly needs. Nevertheless, we cannot expect the new government to be an agent of modernization, since it is the product of the existing institutional structures and hierarchies, which are inherently resistant to change. Since 2003, traditionalists have prevailed in Serbia and have determined the pace and modalities of the transformation. Advances in trans-Atlantic integration (PfP, SAA) were the result of incentives and support given to the democratic forces by international actors, and do not reflect real progress in Serbia. The fear is that this coalition will legitimize the current continuity with Milosevic's policies. The declaration of reconciliation between the parties negotiated by Tadic and Dacic may be an important step toward a wider political reconciliation, but it is tantamount to burying the past without really facing it. At worst, this reconciliation may lead to the vindication of Milosevic's policies and an absolution for those who had committed crimes. This would only deepen the divisions in society and nourish resentment and instability, both in Serbia and in the wider region.

The new government was greeted almost enthusiastically in the EU. Olli Rehn, welcoming the ‘new pro-European' government has said "it is better to rely on evolution than catharsis," and stated that Serbia has a chance to achieve candidate status by December 2008. Active support of the new coalition by the EU and the US may have helped to achieve the desired result. But by participating actively in the process, Western powers have committed themselves to support the new government even if it does not fully meet their expectations. The new government needs economic progress which requires foreign investment and this can be achieved only with a more orderly market, laws and a reformed and independent judiciary, which can deal with rampant corruption. The outcome may be that the EU will be forced to accept watered-down requirements in the accession process. All of this portends the continuation of slow-paced reforms, even as Serbia moves along in the process of European integration.

Kosovo and the cooperation with the ICTY (the transfer of General Ratko Mladic after Radovan Karadzic was apprehended) remain the two major issues that may seriously hamper Serbia's accession process, its economic progress and the stabilization in the wider region. However, Serbia has no capacity for another armed conflict, nor is there a will to start one. The military, with some exceptions, is being reformed and makes consistent progress in its cooperation with NATO. But the continuity of Kostunica's foreign policy, with its emphasis on the diplomatic offensive at the UN General Assembly session, will continue to hold the country back. Serbia's intransigent position on Kosovo has been built into the foundation of the national interest and anchored in the new Constitution. This prevents flexibility and stands in the way of possible solutions to the conflict. This policy is to keep the issue open in hope that the international balance of power will change in Serbia's favor, allowing Serbia to "keep" Kosovo or maybe redrawing the borders in the Western Balkans. The recent crisis in Georgia may only strengthen these expectations.

The May elections demonstrated that there is not yet an electoral majority in Serbia to allow a radical departure from the policies of the past. The new coalition reflects the ambivalent positions of the voters and the confusion created by intensified nationalistic propaganda and distortion of realities. A majority still believes that it can "keep" Kosovo and also get to the EU. The symbiotic relationship forged in the 1990s between tycoons, parties and government institutions (particularly the security services) remains intact, with the tycoons enjoying a dominant position. Yet, the process of accession and economic progress may lead to an incremental shift in the public away from nationalism and toward true democracy. Despite its managed democracy, Serbia has the capacity for transformation. Continued pressure of the civic sector, however fractured, is indispensable for further reforms and democratization to succeed. The need to meet the requirements for EU accession may help accelerate the transition. But Serbia cannot do it alone: support from the EU and the US remains crucial for success.