PODGORICA (Reuters) - Montenegro's ruling alliance will have to form a coalition government with lawmakers from ethnic minorities after voters disillusioned with economic stagnation and corruption denied it a majority for the first time in 11 years.
With nearly all the votes counted after Sunday's election, the alliance of Milo Djukanovic's Democratic Party of Socialists (DPS) and two small parties looked set to get 39 seats in the 81-seat parliament.
Djukanovic, as either prime minister or president, has been the dominant political figure in the Balkan nation since communist Yugoslavia collapsed 20 years ago. He resigned in 2009 to give way to his hand-picked successor, Igor Luksic, but remained at the helm of the party.
He has not said whether he will become prime minister of the country that wants to join the European Union, but his alliance is all but certain to form the government because of the diffuse nature of the opposition.
Djukanovic will have to woo the Bosniac Party of ethnic Muslims with three parliamentary seats, and the Croatian Civic Initiative with one deputy. Both were part of the previous ruling coalition.
However, analysts said the lack of a majority marked a turning point in Adriatic state of 680,000 people that split from a state union with Serbia in 2006.
"The drop of the DPS's (popularity) is obvious ... voters are no longer ready to accept the same messages and support the ruling coalition," said Zlatko Vujovic, director of CEMI, a non-governmental election monitor.
"From now on the opposition will have a chance".
CEMI gave the DPS alliance 45.6 percent of the vote, by an unofficial count. Official results will be released later in the week.
While Djukanovic is still seen as the champion of independence, him and his party have been dogged by accusations of graft and cronyism, which he has consistently dismissed, and most Montenegrins perceive corruption as widespread.
Italian prosecutors accused him of involvement in massive cigarette smuggling during Yugoslavia's international isolation in the 1990s, but he was cleared of all charges.
Montenegrins, whose average salary is 480 euros ($620), the currency Montenegro unilaterally introduced as its own in 2002, voiced a mixture of scepticism and resignation on Monday.
"Who else but Djukanovic? He has led us this far and he can lead us onwards," said Miso Nikolic, 45, a metal worker from the capital Podgorica.
The DPS has made EU and NATO membership a strategic goal. After Croatia, due to join the EU next July, Montenegro is the only Balkan country that could become a member in this decade, as Serbia, Macedonia, Albania and Bosnia are way behind.
But the new government faces a stagnant economy and rising unemployment and will have to work hard to strengthen the rule of law and fight rampant corruption and nepotism, as required by Brussels, which decided in June to open accession talks.
"Whether it is Djukanovic or whoever else, we will still be poor and the society will remain corrupt," said Jovo Novakovic, 68, a pensioner from Podgorica.
Per capita output is 5,200 euros ($6,700), barely a fifth of the EU average.
The pro-government Pobjeda daily newspaper reported the DPS had lost power in Djukanovic's hometown of Niksic in the north, in an early municipal vote also held on Sunday.
"Although it won the most votes, the ruling coalition saw a drop of voters' confidence," the opposition Dan daily said on its front page.
(Editing by Alison Williams)