Serbia’s Prime Minister, Ivica Dacic, says Belgrade wants an agreement with Kosovo – but it is being asked to capitulate.

“The dialogue with Pristina is such that only a wagon is missing where we should sign the capitulation,” he complained to the daily newspaper Vecernje Novosti.

Dacic was speaking after EU-led talks in Brussels on Tuesday failed to yield an agreement with Kosovo on the future of the judiciary and on the presence of the Kosovo military in Kosovo Serb areas.

According to an EU diplomat, Serbia is now prepared to give ground on the judicial question by accepting that regular Kosovo courts made up of mixed panels of judges based on ethnic quotas should operate in the planned Association of Serbian Municipalities.

Serbia had been holding out for local Serb-run first and second-instance courts, which would function under the overall jurisdiction of the Kosovo Supreme court.

According to another source close to the negotiating teams, Belgrade wants the Association to be designated a constitutional factor whose workings cannot be changed without a vote of the Serbs themselves.

Serbia also still strongly opposes the possibility of the Kosovo military being stationed in Kosovo Serb communities.

But Serbian officials must now decide whether to accept the existing deal by Tuesday afternoon or risking losing a start date for EU accession talks.

Dacic has already hinted as further compromises on Serbia’s part, saying that rejection of the deal on offer now will bring nothing good in the long-term because “the next suggestion will certainly be no better”.

Meanwhile, Deputy Prime Minister Aleksandar Vucic has talked in apocalyptic terms of the deal on offer, saying Serbia faced “two equally catastrophic solutions – to accept or refuse a very bad solution for Kosovo.

“But all the people must know that a refusal of the plan would mean closing off Serbia and less money for the budget and economy,” Vucic told the public service broadcaster RTS.

Suzana Grubjesic, Deputy Prime Minister in charge of EU integration, said that if Serbia loses the offer of start date for memberships talks – conditional on progress with Kosovo – the economic consequences could be dire. “A fragile economy like ours can hardly withstand the closure of European funds or loss of investors,” she warned.

“The suspension of the integration [process] means putting long-awaited reforms on hold because reforms come to the forefront only in the negotiating process,” Grubjesic said.

Serbia obtained EU candidacy in March 2012. The European Commission is due to recommend whether Serbia should open negotiations on April 16.

The EU-mediated dialogue was launched in March 2011, three years after Kosovo declared independence.

The aim is to normalize relations between the two countries, both of which aspire to EU membership, in the context of Serbia’s continued refusal to recognise Kosovo’s independence.