Serbia in coalition scramble after ambivalent vote

(adds leaders meet paragraph 7, comment paragraph 9-10)

By Ellie Tzortzi

BELGRADE, May 12 (Reuters) - Serbia's pro-European alliance sought a coalition deal with smaller parties on Monday to stave off a challenge from nationalist runners-up who say they too can form a government after Sunday's parliamentary election.

The state election commission said that with around 98 percent of votes counted, the Democratic Party had 38.75 percent and the nationalist Radical Party 29.2 percent.

The election was fought on whether Serbs should swallow their anger over European Union support for the independence of Kosovo, the Serb province which seceded in February, or turn their backs on the bid for European Union membership.

The Democrats' leader, President Boris Tadic, said: "Serbs have undoubtedly confirmed a clear European path."

"This is a great victory, but it's not over yet". He said the Democrats now had to form a government as soon as possible.

The Radicals' leader, Tomislav Nikolic, said the Democrats had jumped the gun as there were "clear possibilities" of a coalition without them -- notably a Radical alliance with the party of outgoing nationalist premier Vojislav Kostunica, and the Socialists of late autocrat Slobodan Milosevic.

Nikolic and Kostunica already met on Monday morning "to discuss the goals and nature of a future government," a statement from Kostunica's party said.

Serbia's currency and fledgling stock market rallied on the vote result, with traders now waiting for coalition news. Most analysts predicted long negotiations.

"Although we see a very good result for Tadic's Democrats, it remains very uncertain who will form the government," said former US ambassador to Serbia William Montgomery.

"The results show the country is divided, about 50-50, between those who support the politics of the Democratic Party and its partners, and those who support the Radicals and similar parties, like the Socialists and Kostunica's DSS."



EU APPLAUSE

The European Union put the best possible gloss on the result, hailing it as as "a clear victory to the pro-EU parties" and ignoring the nationalist challenge.

"We look forward to work closely with a new government formed on this mandate," said a spokeswoman for EU foreign policy chief Javier Solana.

The EU had made its preference clear before the vote, offering Belgrade a pre-membership pact and a visa facilitation deal that are implicitly conditioned on a Democrat win.

The main pro-EU parties campaigned as one and consolidated their votes in one bloc, slightly increasing their share of the vote over the last election in January 2007.

But they made no great inroads into overall nationalist support, which remained at about 50 percent of the 6.7 million electorate, spread among three parties.

One of the Democrats' choices for a coalition would be an alliance with the small Liberal Democratic Party and minorities.

An alternative would be to ally with Milosevic's Socialists, a favoured option because it would form a stronger coalition and the Democrats were ready to make concessions.

A coalition with Kostunica, Tadic's ally in the eight-month government that collapsed in March, was seen as unlikely.

Kostunica insists Kosovo is more important than eventual EU membership and has cited "unbridgeable differences" with Tadic over the country's future direction. However, he has yet to respond openly to the Radicals' overtures.

Final results are due by Thursday night. Parliament must convene by mid-June and a government be formed by mid-September or the country must hold a new election. (Additional reporting by Mark John and Matt Robinson; Editing by Giles Elgood)