Serbia not giving up Kosovo for EU bid - Tadic

By Gordana Filipovic

BELGRADE, Aug 3 (Reuters) - Serbian President Boris Tadic said on Sunday his country would not drop its opposition to Kosovo's secession in order to become a European Union member.

Tadic nevertheless made clear Serbia would continue to pursue war crimes suspects after its arrest and extradition of Bosnian Serb wartime President Radovan Karadzic, an important step towards EU membership.

"Serbia's EU membership is the supreme national interest and this government will not give up on it," Tadic told a news conference in his first public comment since the arrest of Karadzic last month.

But he stressed Serbia would not abandon its claim to Kosovo and would pursue a diplomatic and political battle.

"Serbia will never give up on its territorial integrity and sovereignty," he said.

Kosovo Albanians declared independence unilaterally in February in a move recognised by many EU countries, although not by the European Union itself. Serbia, backed by Russia, rejects the secession and wants more negotiations on Kosovo's status.

Tadic said Serbia would seek a ruling from the International Court of Justice on the legality of Kosovo's declaration of independence and on the recognition of its independence.

Such an approach would annoy the European Union, Britain's ambassador to Serbia said earlier on Sunday, and that could make joining the bloc more difficult.

The European Union has proposed a police mission to Kosovo and any international court ruling in favour of Serbia might badly undermine its potential mandate. It has already been delayed by Russian opposition at the United Nations.

Tadic said the Eulex force could come as long as it won approval from the U.N. Security Council -- which Russia's veto power in practice makes impossible.

WAR CRIMES SUSPECTS

Tadic dismissed criticism and threats from hardline Serb nationalists over the arrest of Karadzic and said cooperation with the U.N. war crimes tribunal was high on the agenda. Karadzic's army chief Ratko Mladic is still on the run.

"I am ready to take any risk for my policies, which open up the perspective for the citizens of Serbia," Tadic said.

Financial markets welcomed the arrest of Karadzic as a signal that Serbia was ready to do what it takes to join the European Union and renewed foreign investor interest helped push the dinar to a record high of 76.70 against the euro on Friday.

The improved investor sentiment has given a lift to the economy, struggling with double-digit inflation, high budget and current account deficits and massive public spending.

Tadic urged the government, an odd-couple alliance of Tadic's pro-Western party and Socialists of late former President Slobodan Milosevic, not to risk macroeconomic stability for the sake of fulfilling pre-election pledges.

"What is important is that we keep inflation under control," he said. "That is important for the sake of our economic future and for the sake of joining the European Union."

Headline inflation fell to 11.6 percent year-on-year in July, from 12.1 percent in June, because of cheaper fresh food, but financial analysts are watching fiscal plans for signs of anything that could worsen the inflation outlook.

One key pre-election pledge was for an immediate 10 percent pension hike, which it has been estimated could cost Serbia four percent of its gross domestic product.

"Pre-election pledges must be fulfilled in a way any responsible government would do -- by maintaining macroeconomic stability," Tadic said. "The government and the central bank are obliged to coordinate policy to ensure the stability of the financial system."

The backbone of Serbia's future growth was the Stabilisation and Association Agreement (SAA) with the EU and an energy deal with Russia, both of which need to be ratified by parliament, he said. Tadic said nothing would stand in their way.

Gazprom has agreed to build an arm of the South Stream gas pipeline through Serbia in exchange for a 51 percent stake in Serbia's NIS oil and gas monopoly for 400 million euros -- a price some members of the ruling coalition see as too low.

"Those who look at this deal through the price of NIS neglect the strategic interest of Serbia," he said.

(Editing by Matthew Tostevin)