UN official warns Belgrade of damaging Kosovo

UNITED NATIONS, June 20 (Reuters) - The U.N. governor of Kosovo on Tuesday warned Belgrade that its policies in the province were damaging and divisive and were complicating negotiations on the future status of Kosovo.

Soren Jessen-Petersen criticized Belgrade, which finances many services in enclaves in the province, for ordering all Serb government employees in Kosovo to resign from jobs with the United Nations or lose their Serbian paychecks.

"I take the opportunity to call on Belgrade ... to withdraw this damaging directive," he told the U.N. Security Council. He called Serbia's action a "divisive move" that prevented Kosovo Serbs from participating in their future.

Jessen-Petersen, in his last address to the council after two years in the post, said Kosovo was suffering economic hardship and that unemployment was spectacularly high with no prospect of foreign investment until its future was resolved.

"The risk is very clear. Kosovo is a place with some extremely difficult social hardship cases," Jessen-Petersen told a news conference after his council address. "It is my biggest hope that we clarify the status."

The status talks are conducted by Martti Ahtisaari, a Finish statesman. An outcome is expected be presented to the Security Council for approval by the end of the year.

At Jessen-Petersen's side was Kosovo's prime minister, Agim Ceku, who took office in March and is considered to have taken some steps to promote reconciliation with Kosovo Serbs.

Kosovo's 90 percent Albanian majority demands independence -- an outcome favored by the West as the only viable solution, providing rights for Serbs are closely monitored. But Serbia, which has claims on the province rejects this.

The Serbian official in charge of Kosovo policy, Sanda Raskovic-Ivic. told the council that the best solution was "substantial autonomy" within Serbia.

She emphasized little progress had been made to resolve Serb property rights and human rights. "There is no rule of law, corruption is rife, pervasive organized crime hampers economic recovery and ...undermines people's faith in institutions."

Russia's U.N. ambassador, Vitaly Churkin, urged a compromise but stopped short of rejecting independence. But he said a timetable to end status talks by the end of the year was arbitrary and wrong.

"This can be assured only over a lengthy period of time," Churkin said, adding that a "one-sided unilaterally-imposed solution" was not acceptable to the Security Council.

Kosovo has been under U.N. rule since 1999, when NATO bombs drove out Serb forces, accused of ethnic cleansing while fighting an ethnic Albanian insurgency.