A few dozen hardliners confronted police in Belgrade's main square to protest against the impending extradition of Radovan Karadzic this week but the small scale of the demonstration spoke volumes for the political sea change in Serbia.

Five months ago an angry mob set the American Embassy on fire to vent their fury at US support for the independence of Kosovo, the southern province regarded as the cradle of the Serb nation.

Now, a new government has declared its intention of joining the European Union and within two weeks of coming to power produced one of the remaining three fugitives from international justice believed to be in Serbia or under its tacit protection.

There is fresh graffiti in Belgrade pronouncing “Tadic Judas” but President Tadic, who narrowly won a second mandate this year in a close-fought battle with an ultra-nationalist candidate, seems finally to have set Serbia on a course towards the West.

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The key was the formation of a government without Vojislav Kostunica, the nationalist former Prime Minister, and the replacement of his loyal security services chief, which suddenly led to the dramatic seizure of Dr Karadzic by Serb special forces. It has confirmed the suspicion of many that Mr Kostunica, as outspoken critic of the war crimes tribunal in The Hague, had been giving cover to Dr Karadzic.

Bruno Vekaric, spokesman for Serbia's war crimes prosecutor, said that the change of government had inspired the team working to hunt down Dr Karadzic and Ratko Mladic. “There was a whole new energy that came with the victory of the pro-European forces,” he said.

Mirko Cvetkovic, the new Prime Minister, said: “The state of Serbia has made a giant leap forward.” After decades of frustration and setbacks with nationalist leaders, it seems that the nation gave a chance in May's elections to Western-leaning forces who promised to bring the impoverished nation closer to mainstream Europe.

In a sign of how much things have changed, the governing coalition now includes the Socialist Party, which was Milosevic's power base, but which has transformed itself into a forward-looking organisation.

Serbia has had pro-Western forces before, notably Zoran Djindjic, a reformist prime minister who was assassinated outside the main government building in Belgrade in 2003.

There was a growing sense that Serbia could be left behind with poor neighbours such as Romania and Bulgaria soaking up millions of euros of EU funding since joining in 2007, and its old rival Croatia in line for membership in 2010 or 2011.

Braca Grubacic, a political analyst, said: “We realised the West is sick and tired of this old Balkan story. Enough was enough.” Although a bigger demonstration is planned in Belgrade this week against the extradition of Dr Karadzic, no one expects it to match the 250,000 who turned out to support the nationalists as recently as February. The reformers believe that the nationalists cleverly enlisted the Kosovo cause at a time of high tension to drum up support, while all politicians, including the pro-EU reformers, are opposed to Kosovan independence.

The pay-off could be swift: EU leaders made clear on Tuesday that Dr Karadzic's arrest could speed Serbia's membership bid and suggested that capturing Mr Mladic would help even more. “The new Government in Belgrade stands for a new Serbia, for a new quality of relations with the EU,” said Javier Solana, the EU's top foreign policy official.

Tomas Valasik, an expert on the Balkans at the Centre for European Reform think-tank, said: “There are those in Serbia who believe in the idea of a greater Serbia and keep throwing obstacles in the way of membership of the EU. The arrest of Dr Karadzic removes one of those obstacles.”

Not everybody is happy with the new Serbia. Mira Mihinjac, 55, a supporter of the nationalist Radical Party, said: “I think that in Serbia, bad times are coming. I don't trust this Government.”

The younger generation seems more optimistic about the country's future. Branislav Folic, a 27-year-old architect, said: “Everything started to change in a positive way after 2000 [the year of the downfall of Slobodan Milosevic] and you can see on the streets how things are improving. It is connected to the EU but it is also connected to Russia and the US. As people say, money knows no borders.”

Barriers to entry

— Defined as a “potential candidate country” by the European Commission, Serbia hopes to secure EU candidacy by the end of this year before winning full membership in 2012

— The country signed a pre-accession agreement with the EU in April but this is on hold until Serbia is deemed to be tracking down its remaining fugitives. Still at large is Ratko Mladic. Also wanted is Goran Hadzic, a former leader of rebel Croatian Serbs, who has been charged with racial or religious persecution, extermination, imprisonment and torture

— Serbian nationalist politicians branded the agreement with the EU unconstitutional and have vowed to fight against it

— Nicolas Sarkozy and Angela Merkel, meanwhile, have called a halt to European enlargement until the bloc's Lisbon treaty on institutional reform is approved

— Although the European Commission has not said explicitly that Serbia must recognise Kosovo's unilateral declaration of independence, few believe that the country will join the Union without doing so

— Belgrade is expected to seek a UN General Assembly resolution in September asking the International Court of Justice to consider whether Kosovo's declaration of independence is illegal

Sources: Times database, agencies

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