Serbia faces months of instability and stark choice

By Ellie Tzortzi

BELGRADE (Reuters) - Serbia faces renewed uncertainty on Monday under a caretaker government which will lead the country into its most important election since voters ended the era of the late autocrat Slobodan Milosevic

A deep division over the importance of Kosovo versus future European Union membership killed off the 10-month-old coalition of Prime Minister Vojislav Kostunica on Saturday.

Parliament is due to be dissolved this week and a date set for an early parliamentary election, probably on May 11.

But Kostunica's fractured government will have to soldier on at reduced capacity until the nation chooses its fate.

"The election will be a referendum on whether Serbia takes a European path or becomes isolated, like Albania under (Stalinist dictator) Enver Hoxha," Defence Minister Dragan Sutanovac of the pro-Western Democratic Party told the daily Politika.

Kostunica dissolved the government after tacitly accusing his liberal coalition partners of giving up on Kosovo, the 90 percent Albanian majority province which seceded on February 17, with Western backing.

The election will be a close race between the Democrats and the nationalist Radicals, the strongest party.

Kostunica, whose party lies a distant third, quit after the Democrats and the G17 Plus party voted down a resolution that would have blocked Serbia's path to the European Union until the bloc stopped backing the independence of Kosovo.