Problem with shipping methods available.

Dear people.

Is anyone able to suggest , help , advice me about my big trouble.
I have hours trying , changing everything , surfing on internet but still same result.

First problem.

I want to make my website available to sell only in one country (example Serbia).
I want to make free shipping for capital of Serbia(Beograd) and a shipping fee 2euro for all others cities of Greece.

And i want this thing to happen in (cash on delivery way).

First when i select country (serbia) there are not options to select city. Only text blank when i can write city.

Is any possibility in City section to be 10-15 cities of serbia.
And if yes how can i do when the city is not the capital the shipping to be 2 euro?
and for capital to be free.?

Second serious problem.

I think i have followed instructions of woocommerce , when i go in checkout page to try to checkout a product in shipping section i see :

“There are no shipping methods available. Please double check your address, or contact us if you need any help.”

How is that possible when in general settings :
Selling location(s) : Sell to all countries;
Shipping location(s) : Ship to all countries;
Default customer location: Geolocate

Shipping zone settings :
Zone name : Serbia
Region : Serbia
Shipping methods : Free shipping
(You can see photo : http://i.imgur.com/In7Tetk.png )

Now when i select country Serbia i see “There are no shipping methods available. Please double check your address, or contact us if you need any help”

Not only Serbia but every country i select i see that “”There are no shipping methods available. Please double check your address, or contact us if you need any help””

Please help.