* Croatia may conclude entry talks in 2010
* Turkey needs to step up reforms
* Progress uneven in Balkans, corruption widespread
By David Brunnstrom and Marcin Grajewski
BRUSSELS, Oct 8 Croatia could conclude entry talks with the European Union next year but other hopefuls including Turkey have a lot more to do, a draft report by the bloc's executive arm showed on Thursday.
The annual progress report, obtained by Reuters ahead of its publication on Oct. 14, raps would-be members for corruption and organised crime and makes clear that it will take many years before the bulk of them can join the EU.
"If Croatia meets all outstanding benchmarks in time, the accession negotiations, including any transitional arrangements, could be concluded next year," the draft said.
The report gives no entry date for Croatia. Diplomats say the former Yugoslav state of 4.4 million could become the EU's 28th member in 2012 after ratification of its accession treaty. But before Croatia can wrap up entry talks, it still needs to improve its fight against corruption and organised crime, boost its judicial system and increase cooperation with the United Nations war crimes tribunal for the former Yugoslavia.
"The Commission is preparing a financial package for the accession of Croatia," the draft said, referring to how much the country will receive in regional development aid and agricultural subsidies.
Croatia's accession was made possible after it settled this month a border dispute with EU member Slovenia, which had frozen the entry talks for a year.
Ireland's approval of the EU's Lisbon Treaty in a referendum last week also gave enlargement a boost as the charter overhauls the bloc's complex voting system, making room for new members.
There is little appetite for further enlargement among EU member states amid the economic crisis and following the bloc's costly expansion since 2004 to take in 12, mostly ex-communist countries from central and eastern Europe.
CONCERN OVER TURKEY
The French government opposes Turkey's full membership and Germany has doubts, but the Commission says the Muslim country can make progress towards accession if it steps up reforms.
"The pace of reforms now needs to be significantly stepped up," the draft said.
"Concerns remain in a number of areas, including freedom of expression, freedom of the press, freedom of religion, civilian oversight of the military and women's rights."
The draft does not mention Turkey's treatment of media group Dogan Yayin DYHOL.IS, which has been fined billions of dollars for unpaid taxes after being critical towards the government. The opposition says the fine was meant to muzzle the group.
Diplomats expect the case to be mentioned in a separate, technical paper on Turkey that will accompany the main report.
The draft urges Turkey to move towards normalisation of ties with Cyprus. Turkey started EU entry talks in 2005 along with Croatia but they stalled, partly over Ankara's refusal to normalise relations with EU member Cyprus.
Other would-be members -- Serbia, Albania, Macedonia, Bosnia, Montenegro and Kosovo -- were making uneven progress, although Serbia had the strongest administrative ability to push ahead with reforms.
"Corruption is widespread in the region. It affects the everyday life of citizens and the business environment," the draft said.
It appeared to confirm that Iceland, which applied to join the EU recently after being hit hard by the crisis, can sail through entry talks relatively quickly as it is already part of the bloc's single market and the borderless Schengen area.
"The Commission will take account of these elements in its opinion," the draft said. (Editing by Dale Hudson)