Serbian Socialists in talks with Democrats

By Ivana Sekularac

BELGRADE (Reuters) - Serbia's Socialist Party has broken off coalition talks with the nationalist bloc and is starting negotiations with the pro-European alliance led by the Democratic Party, officials said on Saturday.

Socialist leader Ivica Dacic told the state news agency Tanjug there was "no common view regarding the key issues" with the nationalists.

Options for the country now were a new election, a Socialist coalition with the pro-European bloc, or a government without the Socialists.

A Socialist alliance with the Democrats has been seen as a done deal in recent weeks, with media and political sources saying the two parties had been in secret talks for some time.

A statement from the Democratic Party, led by President Boris Tadic, said: "Coalition talks (with the Socialists) ... will begin tonight at 8 p.m. (2 p.m. EDT)."

The Democrats came first in the election on May 11, but fell short of the 126 seats needed in the 250-seat parliament.

The nationalist Radicals and the DSS of outgoing Prime Minister Vojislav Kostunica joined forces after finishing in second and third place.

They were brought together by their virulent opposition to membership of the European Union, which backed independence for the province of Kosovo in February.

But efforts by the nationalists to lure the Socialists, and their 20 MPs, into an alliance stumbled on the EU issue. The Socialists refused to freeze Serbia's bid for EU membership, arguing that the resulting economic progress is key to the generous social policy they stand for.

The Democrats have made clear they are ready to seal a coalition with the Socialists at any cost, in the spirit of a 'forgive-and-forget national reconciliation'.

Once bitter critics of former leader Slobodan Milosevic's aggressive nationalism in the Yugoslav wars of the 1990s, the Democrats now say they will help the Socialists renew their image and could water down economic reforms to accommodate the Socialists' populist agenda.

Political sources say the Democrats would also offer the Socialists several powerful ministerial posts and lucrative positions in Serbia's many state companies.

(Writing by Ellie Tzortzi; Editing by Giles Elgood)