By Benet Koleka and Matt Robinson
TIRANA (Reuters) - Albania's Socialist opposition urged Prime Minister Sali Berisha to accept defeat on Monday after it took a convincing lead in an election seen as a test of the NATO country's democratic credentials.
A projection, based on 42 percent of votes counted, gave the Socialist Party of former Tirana mayor Edi Rama 84 of parliament's 140 seats, ahead of Berisha's Democrats on 56.
If confirmed, the result would end eight years of rule by Berisha and bring to power 48-year-old Rama, an artist and anti-Communist rebel who won international acclaim as mayor for revitalizing Albania's drab capital with splashes of paint and avenues of trees.
The European Union and Albania's NATO allies want an orderly transition, anxious to avoid confrontation in a country that is no stranger to political unrest.
International observers said the election had been marred by an atmosphere of political mistrust, an assessment that is unlikely to help revive Albania's stalled bid to join the EU. A smooth handover, however, could yet salvage the performance.
Rama urged Berisha, Albania's dominant political figure since the collapse of more than four decades of Stalinist rule in 1991, to step aside.
"There always comes a time to lose, and today is the time to do it for the honor of Albania," he said.
"Albania must emerge from these elections holding its head up high ... This is the moment in politics when the losers can take part in the victory of their country."
However, Berisha's party also declared victory within minutes of polls closing on Sunday, raising the risk of a disputed result.
There was no word from Berisha himself on Monday but his Democrats stuck to their guns.
"We continue to have full confidence we shall be the winners when all the votes of the citizens have been counted," said Democrat lawmaker Gerti Bogdani.
Berisha was hoping for an unprecedented third successive four-year term. At 68, defeat could mean the end of his career.
A fiery former cardiologist, Berisha took Albania into NATO and onto the first rung of EU membership but his opponents accuse him of undermining democracy and allowing graft and organized crime to flourish.
Rama, a towering former basketball player, says he will reboot Albania's EU bid and transplant his success in Tirana to the rest of the rundown country.
He has talked of introducing a progressive tax rate and easing the burden on small businesses.
Since 1991, the impoverished country of 2.8 million people has never held an election deemed fully free and fair.
The EU said the vote was a "crucial test" of Albania's progress towards the bloc, which will number 28 member states when Croatia joins on July 1.
Albania applied to come aboard four years ago but has not yet been made a candidate for membership due to concerns over the state of its democracy.
International observers gave a mixed assessment.
The election was "substantive" and offered real choice, they said, but the atmosphere of mistrust between the Socialists and Democrats had "tainted the electoral environment and challenged the administration of the entire electoral process."
A political row that left the Central Election Commission short-staffed and unable to certify the result had increased concerns about the vote.
A shooting during the election in the northwestern Lac region, in which an opposition activist was killed and a Democrat candidate wounded, strained nerves further. No arrests were made.
(Writing by Matt Robinson; Editing by Robin Pomeroy)