Serb Socialists hold key to power after tied election
* Opposition right, ruling liberals tied for power
* Socialists double vote, emerge as kingmakers
* Ex-Milosevic spokesman eyes PM post
* Liberals punished for economic stagnation
By Matt Robinson and Aleksandar Vasovic
BELGRADE, May 7 (Reuters) - The Socialist Party of late strongman Slobodan Milosevic held the key to power in Serbia on Monday after tied elections in which voters angry about the country's economic woes roundly punished the ruling Democratic Party.
The Democrats, part of a reformist bloc that turned Serbia westwards with Milosevic's ouster in 2000, saw their support crumble to 23 percent from 38 percent in 2008, hurt by an economic downturn that has left a quarter of the Serbian workforce jobless.
After years of teetering between pro-Western reformers and pro-Russian nationalists, Sunday's elections for president and parliament were marked by an unprecedented consensus between the major political blocs on Serbia's bid to join the European Union.
The right-wing Serbian Progressive Party, led by former ultranationalists who say they now share the goal of EU accession, claimed the narrowest of victories in the more-important parliamentary vote with around 24.7 percent, but was seen struggling for coalition allies.
The Democrats and the Progressives will fight it out for control of the presidency, too, when Democrat incumbent Boris Tadic and opposition leader Tomislav Nikolic go head-to-head in a run-off on May 20.
The Socialists, led by Milosevic's former spokesman Ivica Dacic, doubled their vote to some 16 percent and emerged as kingmakers.
They are widely tipped to revive Serbia's outgoing ruling coalition with the Democratic Party, an unwieldy, reformist alliance that has brought the country of 7.3 million people to within a whisker of talks on joining the EU.
But Dacic, the interior minister in the former government, will exact a high price.
"Whoever wants to talk to us ... will have to understand that we have risen from the ashes," he told jubilant supporters in the capital, Belgrade.
"Maybe Serbia doesn't know today who will be president, but it knows who will be prime minister."
WAR AND ISOLATION
There were fireworks and trumpets on the terrace of the party headquarters. Dacic has reformed the Socialists, but does not apologise for Milosevic's role in fomenting war in Croatia, Bosnia and Kosovo in the 1990s, conflicts that killed over 100,000 people and drove his own country into poverty and international isolation.
Analyst Zoran Stojilkovic said the Socialists had "huge blackmailing potential."
"They are closer to the Democrats and they will have huge demands," he said. "The likeliest outcome is that the pro-European coalition will continue."
Dacic favours EU membership for Serbia, but is hostile towards the International Monetary Fund (IMF) and the prospect of Serbia seeking new funds from the lender. He has also pledged to protect Serbia's state assets from privatisation.
Tadic and Nikolic were tied in Sunday's first-round vote for president, according to preliminary official results, but analysts expect undecided voters to turn to Tadic on May 20 out of fear of Nikolic's hardline nationalist past.
Nikolic was formerly part of the ultranationalist Radical Party, which shared power with Milosevic in 1999 when Serbia was bombed by NATO to halt the massacre and expulsion of ethnic Albanians in Kosovo.
After repeated election defeats, he broke away from the party in 2008 and pledged support for Serbia's EU membership bid.
Under the Democratic Party, Serbia closed a dark chapter with the arrest and extradition of Bosnian Serb genocide suspects Radovan Karadzic and Ratko Mladic, and in March became an official candidate for EU membership.
The EU is weighing whether to open accession talks next year. They could last until 2020.
But there is widespread anger at the outgoing government over the country's economic woes, fueled by the crisis in the euro zone, the Balkan region's main trading partner. The average Serb takes home 380 euros a month.
Fellow ex-Yugoslav republic Croatia joins the EU next year, driving home for many Serbs just how far they have fallen behind.
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