By Adrian Croft

BRUSSELS (Reuters) - The European Union suspended most sanctions on Zimbabwe on Monday after the country's voters approved a new constitution limiting presidential powers and paving the way for an election.

The move is the most far-reaching step so far in the European Union's strategy of easing sanctions to encourage political and economic reform in the southern African country.

Zimbabwe has been governed by an uneasy coalition since President Robert Mugabe and Prime Minister Morgan Tsvangirai were forced into a power-sharing deal after a disputed 2008 vote.

"The EU ... has today agreed to immediately suspend the application of measures against 81 individuals and eight entities," EU foreign policy chief Catherine Ashton said in a statement.

Ten people, including Mugabe, and two companies, including state-run diamond mining company the Zimbabwe Mining Development Corporation (ZMDC), remain on the sanctions list, restricted by asset freezes and travel bans, an EU source said.

A number of "key decision makers" would remain under EU sanctions until peaceful, transparent and credible elections had been held, Ashton said.

Zimbabwe is expected to hold presidential and parliamentary elections in the second half of the year in what will be seen as a showdown between political rivals Mugabe and Tsvangirai.

Britain, the former colonial power which has regularly clashed with Mugabe, said EU sanctions remained in place on a small core of people around the president.

"That small group includes those who we believe ultimately carry the most responsibility for ensuring elections are free of violence and intimidation," British Foreign Secretary William Hague said in a statement.

The European Union first imposed sanctions on Zimbabwe in 2002, in protest against human rights abuses and violations of democracy under Mugabe's rule.

Rugare Gumbo, a spokesman for Mugabe's ZANU-PF party, said it was "completely unacceptable" for the European Union to only partially lift sanctions.

"We want them unconditionally removed. There is no reason why some should be removed from the list while some remain. There is nothing we have done to deserve these illegal sanctions anyway," he said in Harare.

INTIMIDATION

In a referendum on March 16, nearly 95 percent of voters approved a new constitution that limits presidential terms and strengthens the powers of the cabinet and parliament.

Ashton said the peaceful vote was a significant step towards implementing the 2008 power-sharing agreement.

She said however that the European Union was concerned about recent reports of harassment of political activists.

EU foreign ministers last month removed 21 people and one company from the sanctions list. They also hammered out a compromise under which ZMDC, which operates five diamond mines in Zimbabwe's rich Marange fields, would be freed from sanctions within a month of peaceful and credible elections being held.

The new limits on presidential terms do not apply retroactively, so Mugabe, 89, and in power since independence from Britain in 1980, could still theoretically rule for the next decade.

The referendum passed without incident and turnout was high. But Mugabe detractors seized on the arrest of four staff members from Tsvangirai's party and a leading human rights lawyer as evidence that ZANU-PF is bent on intimidating rivals before the election.

(Additional reporting by Nelson Banya in Harare and Mohammed Abbas in London; Editing by Rex Merrifield and Andrew Heavens)