Kosovo to hold early December 12 vote after government falls

PRISTINA (Reuters) - Kosovo dissolved parliament and set early elections for December 12 after the grand coalition government that declared independence from Serbia was brought down in a confidence vote on Tuesday, the acting president said.

The election will likely delay the start of European Union-sponsored talks with Serbia on improving their poor relations and delay privatization of state-owned companies in one of Europe's most impoverished countries.

"Following the success of the no-confidence vote on the government, I have dissolved parliament," acting President Jakup Krasniqi told reporters. "The early election for the Kosovo parliament will be held on December 12, 2010," he added.

Kosovo's politics became deadlocked when President Fatmir Sejdiu resigned in September after a court ruled he could not simultaneously be a party leader and the head of state.

His Democratic League of Kosovo (LDK) party, which had ruled in a grand coalition with Prime Minister Hashim Thaci's Democratic Party of Kosovo since they declared Kosovo independent in February 2008, quit the government, depriving it of a parliamentary majority.

"This vote is an exit strategy for Kosovo institutions from this crisis," Thaci told lawmakers before the voting process started in the parliament.

"Your vote is a new beginning for the state of Kosovo."

Serbia does not recognize the independence of its former province where a minority of the population are Serbs, complicating daily life and the long-term path to the EU for both countries.

Pressure on both Serbia and Kosovo to mend their relationship grew after the International Court of Justice ruled that Kosovo's declaration of independence was legal.

Kosovo, the youngest and one of the poorest countries in Europe, needs foreign investment to reduce an unemployment rate of more than 45 percent.

The southern Balkan state had planned to privatize the state-owned telecoms firm and choose a company to build a badly needed coal-fired power plant this year.

Rising tension between the two main coalition partners after the president's resignation and preparations for early elections will delay both projects.

Serbia lost control of Kosovo in 1999 after NATO carried out a bombing campaign to halt Belgrade's killing of ethnic Albanians in Kosovo in a two-year counter-insurgency war.

Ethnic Albanians, who make up 90 percent of the population, declared independence in 2008 in a move that has been recognized by 71 countries including most EU members and the United States.

(Reporting by Fatos Bytyci; Editing by Benet Koleka/Alison Williams)