Slovenia threatened to block Croatia's path to EU accession on Monday, citing an unresolved dispute over money owed to a local bank's Croatian depositors dating back to before the 1991 breakup of Yugoslavia.
Croatia hopes to join the European Union next July but can only do so after all current members, including Slovenia, ratify its membership accord.
It wants bilateral talks with its Balkan neighbor on some 172 million euros ($209 million) the now defunct Slovenian bank Ljubljanska Banka (LB) owes to Croatian depositors.
But Slovenia says the issue must be resolved as part of broader "succession talks" aimed at sorting out all such disputes among the former states of Yugoslavia and being led by the Basel-based Bank of International Settlements (BIS).
"I personally wish Croatia would join the EU as soon as possible and that we ratify the accord," Slovenian Foreign Minister Karl Erjavec said on the sidelines of an EU foreign ministers' meeting in Brussels, Slovenian national news agency STA reported.
"But the precondition for that is that we solve the question of LB in line with obligations Croatia agreed to when closing Chapter Four," he added, referring to an EU requirement ahead of new member states joining that refers to the free flow of capital.
Slovenia, the only former Yugoslav state to have joined the EU so far, also says Croatia agreed that the LB problem would be solved as part of the succession talks.
Croatia's Foreign Minister Vesna Pusic, who was also at the meeting in Brussels, said the issues of EU accession and the LB deposits should not be lumped together.
"I strongly believe that Croatia and Slovenia need European partnership and that is why those two issues should be treated separately," Pusic told Croatian state agency Hina.
The European Commission said that it was up to the two countries to resolve the dispute and that it hoped the matter would not delay Croatia's EU membership.
"We see this issue as a bilateral issue between Slovenia and Croatia. We continue to encourage both sides to find a mutually agreeable solution," commission spokesman Peter Stano told a regular media briefing.
"We hope that the ratification process will proceed as planned and everything will be accomplished and completed in time so that Croatia can enter the European Union as is planned on July 1 next year."
Slovenia blocked Croatia's EU bid for most of 2009 over a border dispute until the two agreed to refer the issue to international arbitration. Montenegro is the only other state of the former federation that is in EU membership talks. ($1 = 0.8219 euros)
(Reporting by Marja Novak in Ljubljana, Igor Ilic in Zagreb and Ethan Bilby in Brussels; Editing by Hugh Lawson)