Reuters International

Serbian Prime Minister and leader of the Serbian Progressive Party (SNS) Aleksandar Vucic reacts after elections in Belgrade, Serbia April 24, 2016. REUTERS/Marko Djurica

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By Gordana Katana

BANJA LUKA, Bosnia (Reuters) - Bosnia's Serbs withdrew their objections to a trade agreement with the European Union on Friday, lifting a key blockage to talks on the whole country joining the bloc following intervention from Germany.

Bosnia, an ethnically divided Balkan nation beset by economic woes, applied to join the 28-nation EU in February and hoped Brussels would consider its membership bid at its ministerial council on Monday.

But last month, authorities from Bosnia's autonomous Serb Republic opposed a deal expanding a favourable trade agreement Bosnia had with Croatia to cover all members of the EU, after Croatia joined the bloc - arguing it would lead to a flood of cheap food imports.

Western envoys have warned Bosnia's leaders that the country risked missing out on closer ties with the EU and losing 2 billion euros (1.66 billion pounds) in support due to an impasse over reforms.

Without the prospect of membership, Bosnia risks being left behind by its neighbours who also emerged from the break-up of the former Yugoslavia and who either already belong to the bloc or are far further down the road to membership.

This week, German Agriculture Minister Christian Schmidt promised help to the country as a whole and the Serb Republic in particular to ease the effects of a new trade deal on farmers.

Serbian Prime Minister Aleksandar Vucic, whose country maintains relations with the Serb Republic, advised its President Milorad Dodik on Thursday to accept the deal.

"All obstacles for signing the ... adjustment have been removed," Dodik told reporters, adding the decision was reached after an agreement with Schmidt and talks with Vucic and farmers.

Bosnia's three-man inter-ethnic presidency held an emergency session and ordered the country's main trade negotiator with the EU to initial the deal.

"I think the main role (in accepting the deal) was played by German Chancellor Angela Merkel, who has proved to have a realistic view of political relations in Bosnia," said Serb presidency member Mladen Ivanic.

In late 2014, Germany and Britain launched a joint initiative to help Bosnia relaunch its bid to join the EU. But political and ethnic divisions have halted key reforms.

The Serb Republic and the Bosniak-Croat Federation, the two regions making up Bosnia under a peace agreement that ended the country's war in the 1990s, have yet to agree on an effective coordination mechanism with Brussels, another EU condition to considering Bosnia's application for membership.

(Additional reporting and writing by Daria Sito-Sucic; Editing by Andrew Heavens)

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