Intense pressure by the United States and Europe has salvaged Mostar's joint Muslim and Croat government, overcoming a rift that had threatened next month's national election.
Tuesday's agreement resolves - at least for now - the dispute surrounding Mostar's local elections, a fight that illustrates the deep distrust remaining between Muslims and Croats.International mediators had said that if results of the June election were not recognized, there would be little hope for national elections Sept. 14.
Croats and Muslims were allies against Serbs during most of the Bosnian war, but also fought each other before forming a federation in 1994 under U.S. pressure. Nowhere was the fighting more intense than Mostar, where shat-tered buildings and deep suspicions remain.
Mostar is divided in half by a river. During the war, Croats moved to the western side and Muslims to the east. The European Union has administered Mostar since 1994 in an effort to reunite the city.
In the city council elections, Croats narrowly lost to a Muslim-led coalition. They refused to take their seats on the council, claiming voting irregularities.
The European Union threatened to pull out if a deal was not reached. Sir Martin Garrod, the EU negotiator, said Tuesday's agreement makes it possible for the EU to stay.
"We can go forward working toward making Mostar the city we would all wish it to be," he said.
But it took prolonged pressure to force the deal and, in the Balkans, such agreements often dissolve as soon as the pressure abates.
In another diplomatic move Wednesday, Croatian President Franjo Tudjman met with Serbian counterpart Slobodan Milosevic in Greece - a rare encounter aimed at normalizing relations between the two most powerful republics of former Yugoslavia.
Meanwhile, NATO officials were trying to determine whether a Bosnian Serb cache of more than 2,000 tons of ammunition was hidden illegally.
It was the biggest find of military equipment since the April deadline for registering all military stores with NATO. All unregistered military equipment can be confiscated and destroyed.