The commission is expected to present its report on the western Balkans next Wednesday, the EU Observer reported.

"Croatia has made good overall progress three years after the opening of negotiations," the draft report said.

However, the report cautions that Croatia must still work to establish an independent judiciary, reduce corruption and give minorities full rights, including the return of refugees. It said war-crimes trials are necessary.

Croatian membership could also be stalled because President Nicolas Sarkozy of France, German Chancellor Angela Merkel and some other leaders say the EU cannot admit new members until the Lisbon treaty has been ratified.

The draft report suggests Serbia has made enough progress to become an official candidate for membership next year.