The treaty may enable Yugoslavia, which comprises Serbia and Montenegro, to break out of the international isolation imposed for the Serb role in the wars in Croatia and Bosnia. The European Union said in January that it would not extend full recognition to Yugoslavia unless it normalised relations with Macedonia.
Macedonians voted for independence in September 1991, less than three months after the outbreak of war between Serb forces and the breakaway republics of Slovenia and Croatia. Since then, Macedonia has led a precarious existence, a fact underlined by last year's attempted assassination of the President, Kiro Gligorov.
The state is known formally at the UN as the Former Yugoslav Republic of Macedonia, a formula which reflects Greece's objection that the term Macedonia implies a territorial claim on the northern Greek province of the same name. Greece imposed a trade embargo on Macedonia in 1994 and lifted it last year only after extracting a promise from its neighbour to remove the Star of Vergina, claimed by Greece as an exclusively Greek symbol, from the Macedonian flag.
Macedonia's independence and identity have been vulnerable to pressure from other quarters. Yugoslavia's refusal until yesterday to normalise relations suggested Serbs were reluctant to acknowledge that Macedonia, known in pre-1939 Yugoslavia as "southern Serbia", was now a sovereign state.
Meanwhile, Bulgaria recognised Macedonia's independence but not a distinct Macedonian nationality.
Another potential threat to Macedonia's stability comes from its large ethnic Albanian population, concentrated in western regions and representing at least 20 per cent of the state's 2 million people. Albanians allege the Slav Macedonian majority discriminates against them, and want their separate national status enshrined in the constitution.
Yugoslavia has its own Albanian problem in the southern Serbian province of Kosovo, where tensions run high between the Serb authorities and the Albanian majority. The Albanian question is one issue on which Serbs and Slav Macedonians tend to see eye to eye.
Although Yugoslavia has won back some international respectability since helping to negotiate the Bosnian peace accord at Dayton, difficulties plague its relations with several Yugoslav successor states.
Yugoslavia is angry at Slovenia's efforts to reach a separate deal with the London Club of international commercial banks, over its share of the foreign debt, incurred by Communist Yugoslavia.
Yugoslavia fears that unless it is recognised as the sole successor to the Communist state, it could lose much of the gold and hard-currency assets that are frozen around the world. For its part, Slovenia wants to establish itself on world capital markets and prepare for entry into the EU.
Yugoslavia's relations with Croatia remain in difficulty because of the occupation by Serb rebels of Croatia's province of eastern Slavonia. The area is due to return to Croat control within two years, but Serbs in the region still hope to block the agreement.Reuse content