THE EU leaders suggested that the Organisation for Security and Co-operation in Europe should accept a Serbian invitation to investigate the conduct of recent local elections only if it is empowered to declare them valid or order that they be held again.
They restated their condemnation of the decision by Serbian President, Mr Slobodan Milosevic, to annul the election results of November 17th.
Opposition parties had made substantial gains in the elections but Mr Milosevic claimed there had been irregularities in the poll.
The Council declaration "urges the Belgrade authorities to demonstrate full respect for human and minority rights and the observance of democratic norms, especially with regard to the electoral process
Meanwhile, the international High Representative in former Yugoslavia, Mr Carl Bildt, appeared to give public support to the students and others holding daily protests in Belgrade against the annulment of the results.
"By your actions you are showing Europe and the world that Serbia one day - hopefully not far away - is willing and able to join the family of open and free European democracies," he said.
The Council also welcomed what it said was the progress achieved in implementing the Bosnia peace agreement. It said the EU would increase pressure on the authorities in Bosnia and other states to surrender indicted war criminals to the war crimes tribunal in The Hague.
The statement also said there was a "need to create and maintain conditions needed to encourage the return of refugees and displaced persons to places of their choice in Bosnia and Herzegovina".
It welcomed the plan for the Bosnian government, international agencies and others to draw up a strategy to achieve the return of refugees and displaced persons.
"The EU is committed to continue to make a substantial contribution to the economic reconstructions effort throughout Bosnia and Herzegovina on condition that the authorities in Bosnia and Herzegovina themselves demonstrate their commitment to the reconstruction effort and comply fully with the provisions of the peace agreement.
"In this context the European Council welcomes the plans of the European Commission and the World Bank for the convening of a further international donors' conference in early 1997."
The Council praised the EU administration of the town of Mostar in Bosnia. Its primary objective of "ensuring the establishment of a basis for a functioning unified local administration in the town" had now been met, according to the Council.
The development of relations between the EU and the states of former Yugoslavia was conditional on full support for the peace agreement, according to the statement.
This involved "respect for Bosnia and Herzegovina as an independent, democratic, multiethnic state with secure borders, and upon full co-operation with the International Criminal Tribunal and, where applicable, upon full support for the Basic Agreement for Eastern Slavonia in Croatia.
"Respect for democratic norms and human and minority rights are key factors in the implementation of this approach," it says. The EU also wanted the Federal Republic of Yugoslavia to grant "a large degree of autonomy" to Kosovo within its borders.