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By Adam Tanner
SARAJEVO (Reuters) - EU and U.S. diplomats brought together Bosnian politicians on Thursday to solve deepening ethnic divisions that block reforms in the country and which if unresolved might impact the wider Balkans.
European Union officials in Brussels and in EU rotating president Sweden are leading the latest diplomatic effort to calm ever-more bitter tensions ahead of 2010 elections.
"Bosnia falling further behind the region is distinctly bad," Swedish Foreign Minister Carl Bildt, who is co-hosting the talks, told reporters. "They need to de-block themselves in order not be left further behind."
Bosnia's Orthodox Serbs, Muslim Bosniaks and Catholic Croats fought in Europe's worst conflict since World War Two from 1992 to 1995, in which 100,000 people died. The country is divided into two rival halves -- the Muslim-Croat federation and the Serb Republic.
Within these halves there are difficulties -- on Sunday a soccer fan was killed and dozens hurt in fighting between Bosniaks and Croats.
If not contained, tensions in Bosnia could slow EU and NATO integration for the entire emerging Balkans and deter foreign investors, badly needed because the worldwide economic recession has had a major impact on the region.
"Things have been getting worse. If this trend does not stop, it will lead to conflict, it is just a question of when," said Sulejman Tihic, head of the largest Muslim political party. "This (the talks) is a big chance that we must not miss."
Bosnia holds national elections in October 2010. Past election years have shown increased appeals to nationalist interests and radical views that could hamper any settlement.
"We have no illusions. Reaching agreement on needed reform will be difficult," Bildt said along with conference co-host U.S. Deputy Secretary of State James Steinberg in an open letter to Bosnians on Thursday.
"The elections are already influencing the actions of political leaders. Whatever the apparent benefit of short-sighted political actions, we hope your leaders will also weigh the terrible long-term costs on inaction."
The two will host a small group of political party leaders including Tihic for dinner on Thursday and talks on Friday.
Dragan Cavic, a Bosnian Serb opposition leader, said he would skip the talks at a military base next to Sarajevo airport because of political pressure and negative perception among the Bosnian Serbs of the internationally run negotiations.
"The way the talks have been envisaged -- at a military camp under authority of the European Union force, outside Bosnia's legal institutions and under international supervision -- can hardly guarantee success," Bosnian Serb Nebojsa Radmanovic, one the country's three presidents, told Reuters. The diplomats, joined by EU Enlargement Commissioner Olli Rehn, will present a proposal to fulfil conditions to close the Office of the High Representative (OHR), through which the international community still has ultimate say in the country.
The proposal would also seek Bosnian constitutional reforms and other compromises in return for a faster pace of visa liberalisation and a quicker path to EU and NATO membership, diplomats say.
Many countries are divided over Bosnia's future and whether, as Sweden and Bosnian Serb leader Milorad Dodik suggest, the OHR should be closed down as soon as possible. The final decision on the issue is expected in November.
Opponents of the OHR closure say it could worsen tensions and reward Dodik's assertive push for more autonomy. Bosniak leaders such as Tihic say Bosnian Serb moves towards independence could spark a new war.
(Additional reporting by Niklas Pollard in Stockholm; Editing by Daria Sito-Sucic and Matthew Jones)

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