By Matt Robinson
BELGRADE (Reuters) - When Serbia's opposition leader Tomislav Nikolic took the stage at his presidential campaign finale, the sun bathed Republic Square in Belgrade and Eighties rock blared on loud-speakers over the young crowd.
Gone were the grim posters of war crimes fugitives and the bloody anthems of Serb nationalism that shadowed Nikolic the last time he ran for president in 2008.
The mood was more party than patriotic, and reflected a shift in the political landscape as the former Yugoslav republic votes for a new president and parliament on Sunday.
For the first time since the ouster of Serb strongman Slobodan Milosevic in 2000 after a decade of war and isolation, Serbia's main political forces have the same goal: membership of the European Union.
The 60-year-old Nikolic has rebranded himself from ultranationalist shunned by the West to pro-EU right-wing populist. His opponent, incumbent Boris Tadic, dismisses the change as merely cosmetic, but Nikolic's makeover and promise of reform have struck a chord with voters angry over high unemployment and economic stagnation.
Opinion polls put him neck-and-neck with the 54-year-old Tadic, and give Nikolic's Serbian Progressive Party (SNS) a single-digit lead in the parliamentary election.
Tadic is still the slight favorite in the likely event of a May 20 run-off, when the race goes down to the top two candidates, analysts say, and his reformist Democratic Party has better prospects than the SNS of cobbling together a new ruling coalition.
But that is far from certain.
Under Tadic's eight-year, two-term tenure, Serbia arrested and extradited Bosnian Serb wartime leader Radovan Karadzic and his military commander Ratko Mladic, both wanted for genocide, and in March became an official candidate for membership of the EU.
The arrests lifted a cloud. But Nikolic's conversion, if genuine, could mark a watershed.
"Never in Serbia ... did there exist consensus between the key actors on the domestic political scene on something as important as the European Union. Never," said Marko Blagojevic of the Centre for Free Elections and Democracy (CESID).
"One was always leaning towards Russia, the other to the West; one was for black, the other for white; one was considered good, the other evil."
Long the bogeyman of Balkan politics, Nikolic is now being closely watched in Western capitals.
Diplomats say they are uncertain over his commitment to root out crime and corruption or the ability of his party to carry out the deep reforms required of Serbia to nurture growth and make progress on the long road to EU accession.
But is he acceptable?
"He's not unacceptable," said a senior Western diplomat in the region. "They will have a lot to prove."
There is particular concern over how Serbia's neighbors would greet a Nikolic victory.
To Bosnia and Croatia, where Serbia fomented war in the 1990s, Nikolic will forever be associated with his political mentor Vojislav Seselj, the firebrand leader of the Radical Party who is standing trial in The Hague accused of recruiting and financing paramilitaries who killed, persecuted and tortured non-Serbs during the break-up of Yugoslavia.
With Seselj gone, Nikolic broke away from the Radicals after the last elections. But Tadic has played up those links during the electoral campaign.
"Will this country be governed by those who have shamed us, by those who threatened to kill hundreds of members of other nations and religions for every one of us killed?" he told a campaign rally. "Or will this country be governed by those who have international credibility?"
Nikolic is unabashed.
"Boris Tadic won with the message that we want to be in the European Union," he told Reuters. "Why would I continue opposing the European Union and condemn myself to staying in opposition forever? Why, when it's good?"
"I've been in politics for 22 years. Of course I've had to change my opinions. The people of Serbia have changed their opinions."
An uninspiring orator, Nikolic's straight talking has nevertheless resonated with Serbs tired of the grinding transition from socialism to capitalism and the impact of the crisis in the euro zone, the Balkan region's main trade partner.
Unemployment this year reached almost 24 percent. The population is shrinking and aging, and the average net monthly wage is just 380 euros ($500). The country of 7.3 million people will struggle to reach a forecast of 0.5 percent economic growth this year.
There is little light between the two blocs on the economy. Both will face pressure to reform the judiciary, cull the public sector and cut the Socialist-era red tape that is stifling investment.
Both will be confronted with difficult decisions on Kosovo, Serbia's former southern province that declared independence in 2008. The EU wants ties between the two to improve before it opens membership talks with Serbia.
Underscoring tensions, NATO has sent an extra 700 German and Austrian soldiers to bolster its Kosovo peacekeepers, with the Albanian majority angry at plans for the Serb minority to vote in Sunday's elections.
Some 7 million people are eligible to cast ballots. While the presidential vote will almost certainly go to a run-off, the parliamentary election will potentially trigger months of horsetrading over cabinet seats and lucrative positions in state-run companies.
Ironically, the kingmaker could be Ivica Dacic, a former Milosevic spokesman who inherited the Socialist Party of Serbia that is now polling third. Dacic was the country's interior minister in the outgoing Democrat-led coalition and is also in favor of EU accession.
But he will exact a high price in return for his support for the next government, possibly the post of prime minister, unless Nikolic and Tadic defy all expectations and join forces in a grand coalition.
"Why would anyone vote for Tadic or Nikolic," he told Reuters on Sunday, "when both will have to come to me?"
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(Editing by Alessandra Rizzo)