Serb parties enter tense coalition negotiations

BELGRADE (Reuters) - Serbia's outgoing prime minister Vojislav Kostunica, once valued as a champion of reform by the West, teamed up with ultranationalist Radicals on Tuesday seeking to form the country's next government, his party said.

"A draft agreement on the nature and policy goals of Serbia's new national government was adopted at a meeting ... led by Vojislav Kostunica and (Radical leader) Tomislav Nikolic," spokesman Andreja Mladenovic told reporters.

It was the opening move in an elaborate coalition mating dance following Sunday's inconclusive general election, which asked Serbs to decide whether to shelve their bid for European Union membership to display defiance over Kosovo's independence.

Voters boosted the fortunes of pro-European Union parties, but not by enough to give them a ruling majority. The coalition which emerges in the coming days can decide Serbia's direction -- towards the EU or towards closer ties with Russia.

Kostunica turned against the EU when it backed the secession of Kosovo, the province whose 90 percent ethnic Albanian majority declared independence in February. He wants Serbia's EU membership bid frozen until European powers change their minds.

Radical chief Nikolic said ahead of the election that he would offer Kostunica the top post in a new coalition. Serbia's pro-EU president, Boris Tadic, who broke with Kostunica in February, said he would never have him as prime minister again.

To form a majority government, Nikolic and Kostunica need the Socialists of the late Slobodan Milosevic, ousted in 2000 when Kostunica came to power.

OPTIONS OPEN

Nikolic said the three parties would meet on Wednesday to see if his terms were acceptable to the Socialists.

"If they are, we'll have a ... government. If not, the Radicals will be in opposition," he told Beta news agency.

But two days after voters gave them a key 20 parliamentary seats in the election, which was triggered by the collapse of the Tadic-Kostunica coalition, the Socialists were keeping their options open and their cards close to their vest.

They are also being courted by Tadic's Democratic Party bloc, which came out on top in Sunday's poll, beating the Radicals by 39 percent of the vote to 29 percent.

The respected daily Politika said that if the Socialists backed Tadic, "no one in the West would be able to call them 'the forces of the past' anymore, while Tadic would benefit from the Socialist image as fighters for social justice".

Tadic's Democratic-led "Coalition for a European Serbia" also announced it had entered coalition talks on Tuesday.

It did not say with whom, but in an unmistakable overture to the Socialists, Tadic pledged he would "work for the good of absolutely all citizens, on the principles of social justice, protection of workers' rights and creation of new jobs".

In Brussels, EU foreign affairs chief Javier Solana said he wanted to see a stable pro-EU coalition in Serbia and made clear he would not object if it included the Socialists.

Solana was head of NATO in 1999 when the alliance went to war over Kosovo, bombing Serbia for 11 weeks until Milosevic gave in and withdrew his forces from the province.

(Additional reporting by Matt Robinson and Ljilja Cvekic; Editing by Alison Williams)