By Margarita Antidze and Hasmik Mkrtchyan
YEREVAN (Reuters) - Armenia holds a parliamentary election on Sunday which leaders hope will reinforce stability and be free of the fraud and violence that marred the South Caucasus country's last national polls.
The biggest parties in the coalition government, President Serzh Sarksyan's Republican Party and Prosperous Armenia led by businessman Gagik Tsarukyan, are expected to remain the strongest in the former Soviet republic of 3.3 million.
Sarksyan promised a fair election that would signal a break from the past in a country that hankers for stability to boost the economy, devastated by a war with neighboring Azerbaijan in the 1990s and then hit by the 2008-09 global financial crisis.
"We have managed to turn the political fight into a fair competition," he told supporters during campaigning in the mountainous and landlocked country which has found prosperity elusive since winning independence from the Soviet Union.
The poll will be monitored by more than 300 international observers from the Organisation for Security and Cooperation in Europe (OSCE), which said the last parliamentary election in 2007 fell short of international standards.
A blast at a campaign rally injured about 150 people on Friday, raising fears of a repeat of the violence that killed 10 people after the 2008 presidential election, but emergency officials said it was caused by gas-filled balloons exploding.
The violence in 2008, when eight opposition protesters and two police were killed in clashes, dealt a severe blow to the country's democratic credentials.
Richard Giragosian, director of the Regional Studies Centre in Yerevan, said Sunday's election was a test of the credibility of the president and government and "an opportunity for the Armenian president to move beyond the legacy of March 2008 once and for all."
OIL AND GAS TRANSIT ROUTE
Armenia nestles high in the mountains of a region that is emerging as an important transit route for oil and gas exports from the Caspian Sea to energy-hungry world markets, although it has no pipelines of its own.
Although a ceasefire was reached in 1994, its conflict with Azerbaijan over the tiny Nagorno-Karabakh region remains unresolved and a threat to stability.
Relations with another of its neighbors, Turkey, are also fraught because Ankara does not recognize as genocide the killing of Armenians in Ottoman Turkey during World War One.
Armenians hope a peaceful election will help the country's recovery after its economy contracted by 14.2 percent in 2009.
The economy grew by 4.6 percent in 2011 and the International Monetary Fund expects 3.8 percent growth in 2012. Inflation was reduced to 4.7 percent in 2011 from 9.4 percent the year before.
Eight parties and one party bloc are running for places in parliament and 155 candidates are registered in 41 single-mandate constituencies.
The ruling coalition also included two other parties, but one pulled out in 2009, citing differences over foreign policy. The other coalition partner, Country of Law, may struggle to cross the five percent of votes threshold to enter parliament.
Analysts say the Armenian National Congress, a coalition of opposition groups led by former President Levon Ter-Petrosyan, could make it into parliament after leading street protests since losing the 2008 presidential poll to Sarksyan.