The first €2 million will arrive by Monday, Prime Minister Aleksandar Vucic said as he attended a regional investment conference in the town.

Mr Vucic said: "We want Srebrenica to become a bridge of co-operation.

"Nobody can return the brothers to their sisters, the children to their mothers but what we can do is to look into the future, make it different, take care of those 20,000 people who still live here."

The move is yet another attempt to atone for war atrocities that have kept the region unstable.

In July, Mr Vucic had to flee events in Srebrenica marking the killings' 20th anniversary when angry mourners pelted him and his entourage with rocks during the funeral of 136 massacre victims found in nearby mass graves.

He revisited the cemetery today to lay flowers and take a walk among the thousands of white grave stones.

Bosnian prime minister Denis Zvizdic said the two countries want to open a new chapter in their relations.

Srebrenica mayor Camil Durakovic said: "We did not even expect so much money."

He added that the money will "change the lives of the residents of Srebrenica".

Bosnian Serbs, backed by Serbia, expelled the entire Muslim population and executed 8,000 Muslim men and boys when they overran the town by the end of the 1992-95 war which became known as the worst massacre in Europe since the Nazi era.

Since then, just a few hundred Muslims, mainly women, returned to the town where the unemployment rate is 60 per cent and relations between Muslims and Serbs still are burdened by the past.

Reviving the town's economy and rebuilding the infrastructure should not only ease the lives of those who now live there but attract others to move back to Srebrenica, Mr Vucic said.