By Ivana Sekularac and Aleksandar Vasovic
BELGRADE (Reuters) - Serbia needs to accept that it has lost control over Kosovo, its former southern province, and it must seek a compromise to normalise ties with Pristina, President Aleksandar Vucic told parliament in unusually blunt terms on Monday.
Majority-Albanian Kosovo declared independence in 2008, almost a decade after NATO air strikes wrested control of the territory away from Belgrade, ending a brutal counter-insurgency by Serbian security forces.
But Serbia, which under its constitution considers Kosovo an integral part of its territory, has been blocking Kosovo from membership of international institutions including Interpol and UNESCO. It also still provides financial aid to Serbs in Kosovo.
For years, Kosovo's independence has been a taboo topic in Serbia because most Serbs regard it as the cradle of their nation and of the Orthodox Christian faith.
But Vucic spoke plainly on Monday.
"We need to recognise that we have been defeated.. We lost the territory," Vucic told parliament during a special session dedicated to Kosovo.
"I did not opt to continue with lies and deceit. I have told everyone: There is no Serbian (visible) authority in Kosovo except in hospitals and schools," he said.
Serbia and Kosovo agreed to an EU-sponsored dialogue in 2013 to resolve all outstanding issues between them, which was key for both countries to progress towards membership in the European Union. But little progress has been achieved since then.
Their talks became deadlocked last November when Pristina introduced a 100% tax on all goods imported from Serbia. That move is expected to curb economic growth in Serbia slightly, as its exports to Kosovo amount to 500 million euros a year. Nevertheless, the IMF expects Serbia's economy to grow 3.5% this year.
"We have two options - to normalise relations by reaching an agreement or to maintain a frozen conflict," Vucic told the deputies, mostly members of the ruling coalition controlled by his Progressive Party.
Vucic is attempting a balancing act, maintaining both Serbia's EU aspirations and its close ties with Russia and China, neither of whom recognise Kosovo. Five EU member states have also not recognised its independence.
However, he said it could take years before an agreement with Kosovo is achieved. He said Serbia would wait for Pristina to remove the 100% tax and then seek a compromise.
Any solution will also require a referendum in Serbia.
"We will ask people to say what they think about a possible compromise solution in a referendum," Vucic said.
Most opposition parties boycotted the session in parliament, in protest at what they call Vucic's autocratic rule. They accuse him of stifling media freedoms and turning a blind eye to high-level corruption. Vucic denies these allegations.
Gordana Comic, a deputy for the opposition Democratic Party, said Vucic was merely trying to sound like some sort of agreement with Kosovo might be possible soon to please the EU.
"This is the creation of atmosphere for announcing a 'legally binding agreement' (with Kosovo) in a few months ... ahead of the formation of the new European Commission," Comic said.
(Reporting by Ivana Sekularac and Aleksandar Vasovic; Editing by Hugh Lawson)