Two main Kosovo parties to form government

PRISTINA, Serbia (Reuters) - Kosovo's two main political parties have agreed to form a coalition government which will lead the breakaway province towards independence from Serbia early next year, party sources said on Wednesday.

A formal agreement was due to be signed later in the day.

Former guerrilla commander Hashim Thaci, whose opposition Democratic Party of Kosovo (PDK) won a parliamentary election on Nov 17, will become Kosovo's fifth prime minister since 1999 when the United Nations took under control the province.

The PDK will have seven ministries in the government and its partner, the rival Democratic League of Kosovo (LDK), five. Three are reserved for Kosovo's ethnic minorities, including Serbs.

"We need a functional and stable government at this important time when Kosovo is moving towards independence," a senior official of the PDK told Reuters.

Kosovo has been run by the United Nations since 1999, when NATO mounted a bombing campaign to drive out Serb forces and halt the ethnic cleansing of Kosovo Albanians in a two-year counter-insurgency war.

The 90-percent ethnic Albanian majority, backed by the United States and Western European countries, is preparing to declare Kosovo's independence in the first months of 2008.

Serbia is not ready to accept an independent Kosovo and its ally Russia, with veto power in the U.N. Security Council, is also opposed.

The LDK's fortunes have foundered since the death in 2006 of its leader, then Kosovo president Ibrahim Rugova. From 45.5 percent in 2004, the LDK's share of the vote last month fell to 22.6 percent.

The PDK won 34.3 percent. Together the two parties will hold 62 seats in the 120-seat parliament.

(Reporting by Fatos Bytyci; editing by Andrew Roche)