Serbia's parliament has agreed to loosen ties with Montenegro, a major step towards consigning the name Yugoslavia to history.

Under the accord the two republics constituting the Union of Serbia and Montenegro - as the new arrangement will be known - will share a common foreign and defence policy, but otherwise lead independent lives.

The agreement comes after months of intense international pressure and concern among supporters that wrangling among politicians might have scuppered it, says the BBC's correspondent in Belgrade Matthew Price.

Montenegro is expected to vote in favour of the constitutional change on Tuesday. Yugoslavia's federal parliament has not yet scheduled a vote on the deal.

The union also officially includes Kosovo, the largely Albanian-inhabited province which has been under international administration since 1999, when Nato forces drove out Yugoslav troops.

The biggest obstacle blocking agreement on the deal was how to elect representatives to the federal parliament.

Montenegro eventually agreed to allow for federal legislators to be elected directly after an initial period of secondment.

Until then, both entities will continue to nominate the same number of members to the assembly regardless of their size.

Serbia has a population of about 10 million whilst Montenegro has about 650,000 inhabitants, including many ethnic Serbs.

After a period of three years, the member-states have the right to seek full independence.

Serbia's assembly voted 166 to 47 to approve the proposal for the new union, also backing separate legislation to implement the deal.

Mixed reaction

People in Yugoslavia view the imminent end of their country with a mixture of nostalgia and inevitability, says our Belgrade correspondent.

Some are fed up with what they see as a deal imposed by the international community.

Others are asking practical questions, such as how will supporters cheer for a national basketball or football team, which is called rather clumsily Serbia and Montenegro.

Talks to finalise the agreement had failed repeatedly since a framework deal was first signed in March 2002.

Euro stakes

Spearheading international pressure, the European Union's foreign policy representative, Javier Solana, had warned that lack of agreement meant that crucial talks on Yugoslavia's progress toward closer ties with the EU would be held back.

The Kingdom of Serbs, Croats and Slovenes created after the First World War became known as Yugoslavia in 1929.

After World War II, Yugoslavia became a federal socialist republic under Marshal Tito with six constituent republics - Croatia, Montenegro, Serbia, Slovenia, Bosnia-Herzegovina, and Macedonia.

The union disintegrated in the early 1990s as first Slovenia and then Croatia declared their independence - sparking a series of wars that saw Bosnia and Macedonia secede and the country reduced to a two-member federation consisting of Serbia and Montenegro.