Serbia has refused to recognise Kosovo's 2008 declaration of independence but fulfilling Angela Merkel's conditions would, Belgrade fears effectively mean giving up its claim on Kosovo.

Having arrested Ratko Mladic and Goran Hadzic this year, Serbia had hoped it had done enough to obtain not only EU candidate status but also get a date for the start of accession talks.

The pair were the last fugitives wanted by the International Criminal Tribunal for the Former Yugoslavia in The Hague.

Belgrade is particularly unhappy at Merkel's insistence that it must dismantle the parallel administrative structures it maintains in Kosovo's Serb majority north, such as post offices, schools and municipal administrations.

"Serbian institutions are necessary for the Serb community in Kosovo and we can neither give up those institutions, nor abolish them because that would mean giving up our wish to keep Kosovo in Serbia," Serbia's Minister for Kosovo Goran Bogdanovic told the Beta news agency Wednesday.

All demands to abolish "so-called parallel institutions" for Serbs in Kosovo are "absolutely unacceptable," he stressed.

While only a few pockets of ethnic Serbs remain in Kosovo, the territory is seen as the cradle Serbian history and culture and is still formally the seat of the very powerful Serb Orthodox Church.

Merkel visited Belgrade on Tuesday after fresh tensions flared between Serbia and Kosovo.

Serbia's ambassador in Germany, Ivo Viskovic, told broadcaster B92 that Belgrade was not surprised so much by Merkel's list of conditions but rather by her harsh tone.

"Maybe just the sharpness of the request to abolish the institutions in northern Kosovo is something that was not expected.

"The request is something that Serbian authorities absolutely cannot accept at the moment," he said.

The government in Belgrade had also hoped to capitalise on an EU candidacy this year to boost its chances in general elections expected in spring 2012.

Viskovic said Berlin was calculating that Serbia would do anything to get candidacy status at this point.

The head of a foreign ministry advisory body known as the Foreign Policy Council, Sonja Liht, said she was surprised by Merkel's message.

"These conditions were unexpected... until now it was clear that there would not be new conditions except a continuation of the dialogue with Pristina" started in March under EU mediation, she said.

Merkel on Tuesday listed the conditions that she said Belgrade must meet if it wanted to be accepted as an EU candidate this year.

"If Serbia wants to achieve candidate status it should resume the dialogue (with Pristina) and achieve results in that dialogue, enable (the European judicial mission) EULEX to work in all regions of Kosovo, and abolish parallel structures", Merkel said in Belgrade.

At a lunch with top government officials Merkel insisted that Kosovo was an independent state and that it was necessary to find more creative and innovative solutions, the Blic daily said.

This was interpreted in Belgrade as a message to Serbian authorities "to find the right way to present Kosovo's independence to their citizens once the time comes", the paper said, and quoting anonymous sources.

Merkel's visit came just days before the EU-mediated dialogue was set to resume after a turbulent month in Kosovo's north.

The crisis flared in late July when Pristina forcibly replaced ethnic Serb border guards attached to the Kosovo police with ethnic Albanian officers at two border crossings to enforce a trade ban with Serbia.

Residents in northern Kosovo reacted angrily and an ethnic Albanian police officer was killed and four injured in ensuing clashes.

European Union-mediated talks aimed at easing day-to-day headaches between the sides are due to resume on September 2.

Copyright AFP (Agence France-Presse), 2011