BELGRADE, Yugoslavia (AP) _ Serbia and Montenegro signed a historic accord Thursday that will radically restructure Yugoslavia, giving the nation a new name and its republics greater autonomy to prevent the country's final breakup.
The agreement, reached under mediation by the European Union, was signed by Yugoslav President Vojislav Kostunica, Montenegrin President Milo Djukanovic, EU foreign policy chief Javier Solana and other Serbian and Montenegrin officials.
The new country, consisting of two semi-independent states, will be renamed Serbia and Montenegro, said Serbian Prime Minister Zoran Djindjic. The republics will share a defense and foreign policy, but will maintain separate economies, currencies and customs services.
``The new country would be neither a federation nor a confederation, but would represent a new original solution,'' Kostunica said earlier Thursday.
Kostunica told reporters earlier that the political accord calls for new federal elections in the autumn, and that the parliaments of both republics would set to work on constitutional changes. The country's new name will not take effect until lawmakers ratify the accord.
``This is a new beginning in relations between Serbia and Montenegro,'' Kostunica declared. ``We have reached an agreement which is acceptable for both Serbia and Montenegro.''
There was no immediate reaction from Djukanovic.
Kostunica said his office as federal president would remain and that the new country would have one seat in the United Nations, just as Yugoslavia does now.
Montenegro agreed to set aside its drive for a referendum on independence that was to be held this May, Djindjic said, adding: ``We accept reality as it is.''
The West opposes Montenegrin secession, fearing the breakup could encourage independence-minded groups in the region _ in particular, ethnic Albanians in Kosovo and Macedonia.
Arguing that secession would hurt Montenegro's economy and slow down the process of integrating it into mainstream Europe, the EU was pushing for a new Yugoslav constitution that would preserve a joint state while granting the two republics greater self-governance.
Both republics agreed that for the time being, at least, Montenegro could maintain the euro as its currency instead of the Yugoslav dinar used in Serbia.
Djukanovic, who advocates independence for Montenegro, rejected the Yugoslav dinar in exchange for the German mark two years ago. Since January, the euro has circulated as the republic's official currency.
Montenegro's 650,000 people are bitterly divided on whether to remain in a federation with Serbia, whose approximately 8 million people effectively determine Yugoslav affairs.
Serbia and Montenegro stayed together when other republics started leaving Yugoslavia in the early 1990s, but their alliance began to crumble in 1997 when Djukanovic distanced himself from then-Yugoslav President Slobodan Milosevic and began advocating independence for Montenegro.
The Kingdom of Serbs, Croats, and Slovenes was formed in 1918; its name was changed to Yugoslavia in 1929. The country was occupied by Nazi Germany during World War II, then tightly controlled under the communist regime of Marshal Tito for four decades after the war.
Yugoslavia began to unravel along ethnic lines; Slovenia, Croatia, Macedonia, Bosnia and Herzegovina all declared their independence by 1992.
Under Milosevic, Serbia led military efforts to unite the neighboring republics into a ``Greater Serbia.'' All of these efforts were unsuccessful. An attempt to expel ethnic Albanians from the Serb province of Kosovo led to the 1999 NATO bombing of Serbia, and eventually Milosevic's ouster in 2000.
The tiny Adriatic republic of Montenegro continued its independence drive even after Kostunica took office.