June 12, 2012 / 6:58 PM / 6 years ago

Serbia's Democrats close in on coalition government

BELGRADE (Reuters) - Serbia edged closer to reviving its outgoing coalition government on Tuesday after the reformist Democratic Party and its Socialist allies said they had agreed on policy but needed “a few days” to divide up power.

A government headed by the Democrats’ Boris Tadic would help calm nerves in Europe and the region, rattled last month by a presidential run-off in which liberal Tadic, president since 2004, lost to nationalist leader Tomislav Nikolic.

“We have analysed ... and agreed on the principles of economic policy, the regional and international agenda and Kosovo,” Tadic said after talks with the Socialist-led bloc headed by Ivica Dacic, interior minister in the outgoing government.

“In the coming days our associates will discuss details concerning the structure of the government, ministries and the division of responsibilities,” he told reporters. “In a few days we’ll know who will be the backbone of the new government.”

A pact between the Democrats and Socialists would still require the support of at least one other party to secure a majority in the 250-seat parliament - either the staunchly pro-Western Liberal Democratic Party or the pro-business United Regions party of former economy minister Mladjan Dinkic.

Analysts warn it could yet all fall apart over the division of powerful portfolios and control over state-run companies.

Nikolic’s shock victory followed an inconclusive parliamentary election narrowly won by his rightist Serbian Progressive Party (SNS) and sent the dinar currency to record lows against the euro on uncertainty over whether the Balkan country would stick to its pro-reform, pro-European course.

The SNS fell short of an outright majority, and Tadic has since been manoeuvring to take the more powerful post of prime minister in a pact between his second-placed Democrats and the third-placed Socialists.

“EURO-FANATICS”

Nikolic, 60, says he backs Serbia’s ambition to join the European Union, but Western diplomats say his commitment could be tested by the tough reforms asked of Serbia as it bids for accession talks possibly next year.

Tadic, 54, is seen by the West as a safer pair of hands in a region still healing from the bloody breakup of Yugoslavia in the 1990s when more than 125,000 people died.

The country desperately needs a new government that will rein in debt of more than 50 percent of gross domestic product (GDP), cut spending and revive a lending deal with the International Monetary Fund.

The economy risks stagnation or even recession this year, with growth forecast at only 0.5 percent of GDP and unemployment at around 24 percent.

The EU will also press the next government to make more concessions to improve relations with Kosovo, the former Serbian province that declared independence in 2008 but is not recognised by Belgrade.

Dacic hinted earlier he could switch allegiances given that both Tadic and Nikolic share the same strategic goal of EU accession.

“Maybe it would suit me better to be prime minister in some other combination,” he told reporters ahead of talks with Tadic. “Here it’s no longer a question of who is and who isn’t pro-European. I’m a bigger nationalist than Tadic and Nikolic. They’re both Euro-fanatics.”

Writing by Matt Robinson

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