The arrest of war criminal Ratko Mladic, alleged architect of the Srebrenica massacre in 1995, tears down one of the remaining barriers preventing Serbia joining the European Union.
69-year old Mladic was a leader of Bosnian-Serb forces during the Balkan wars during the 1990s, and is wanted for war crimes, including genocide, dating from that period. The July 1995 assault on Srebrenica led to the deaths of 8,000 Muslim men and boys in one of the worst acts of "ethnic cleansing" since the end of the Second World War.
The arrest and extradition of Mladic, as well as other wanted war criminals, was among the preconditions for the EU to consider Serbia for membership. Radovan Karadzic, the political leader of the Bosnian Serbs during the war, was arrested in Belgrade in July 2008, where he had been living in disguise as a faith healer.
Boris Tadic, Serbia's president, announced the arrest at a press conference on Thursday.
Anders Fogh Rasmussen, NATO's secretary general, issued a statement welcoming the arrest.
"As Bosnian Serb military commander, General Mladic played a key role in some of the darkest episodes of Balkan and European history, including the siege of Sarajevo and the massacre of thousands of Bosnian men and boys in Srebrenica in 1995" Rasmussen said. "Almost sixteen years since his indictment for genocide and other war crimes, his arrest finally offers a chance for justice to be done."
Around 100,000 people were killed in inter-ethnic fighting in the Balkans during the 1990s, and (the genocide) still resonates across the region today. Kosovo, an ethnically Albanian region of Serbia, declared independence in 2008. The country is recognized by some EU members, but has not gained universal acceptance.
With Serbia seeking to become a candidate country for EU entry – a process that its Balkan neighbor Croatia is close to completing – this arrest could be a milestone in its development and rehabilitation, analysts said.
"I think his arrest is quite well timed, if you will, given that it was widely expected that the chief prosecutor at the Hague, Serge Brammertz, was going to deliver a negative report about Serbia's cooperation," Dragana Ignjatovic, Balkan analyst at IHS Global Insight told CNBC.com. "Serbia is hoping to get candidate status this year, which it had been told it could not have without increased cooperation, namely the arrest."
Gabriel Sterne, an economist at Exotix who covers the Balkans, told CNBC.com that, as well as being politically significant, the arrest could provide an uplift to a country that, despite having improving fundamentals, trades below its neighbours.
"I think the fact that he was still out there was an irritant for some countries, particularly the Netherlands, whose peacekeepers were there at Srebrenica, and they were probably the ones taking the toughest line," Sterne said. "I think the fact that they've actually got him will be of some significance in removing, or putting forward some goodwill towards their EU entry."
He added: "I think there will be an immediate uplift, but I don't think it will be a huge one. The benchmark is what happened when Radovan Karadzic got arrested back in 2008, and then the prices of the bonds went up around 1.5 percent. It's significant but not huge, I think. I think they were on the track towards accession a bit slower than they would like, and this will help them on the way. It’s significant news for the bonds, but probably more significant for the symbolic politics of it."