By Matt Robinson
BELGRADE (Reuters) - Serbia's right-wing opposition bids for power on Sunday in knife-edge elections marked by an unprecedented pro-European consensus more than a decade since the fall of nationalist strongman Slobodan Milosevic.
Liberals who took power in 2000 face their strongest challenge yet from the opposition led by Tomislav Nikolic, once demonized by the West as Milosevic's spiritual heir but who says he now shares the goal of taking Serbia into the European Union.
Nikolic, 60, and his populist Serbian Progressive Party are narrow favorites to win elections for president and parliament, capitalizing on voter anger over the Balkan country's grinding transition from socialism to capitalism.
A somber former cemetery manager, Nikolic could yet be denied the presidency in a second round on May 20, when unease over his past might drive undecided voters to liberal incumbent Boris Tadic, 54.
No party will win an outright majority in the parliamentary vote, and most analysts predict Tadic's Democratic Party will retain power with a rehashed version of the outgoing government.
The Socialist Party of Milosevic, who died in 2006, is polling third and likely to emerge as kingmaker. Party leader Ivica Dacic has indicated he favors a fresh coalition with the Democratic Party, but might demand the post of prime minister.
Under the constitution, the prime minister is more powerful than the president.
But in a sign of how far the political landscape has shifted, analysts and diplomats say some Western capitals favor a "grand coalition" between the Tadic and Nikolic blocs, hoping that together they will raise the pace of reform.
Serbia since Milosevic has teetered between pro-Western liberals and unrepentant, pro-Russian nationalists. Nikolic says Serbia can be a bridge between East and West, but his conversion to the ultimate goal of EU membership marks a watershed.
"The main parties agree on how to go forward," a senior Western diplomat said. "That's the major difference," he said, but noted Nikolic would have "a lot to prove".
Nikolic is a former deputy leader of the ultranationalist Radical Party, whose leader Vojislav Seselj is standing trial in The Hague accused of recruiting and financing Serb paramilitaries during Yugoslavia's bloody collapse.
The Radicals were ideological allies of Milosevic, in power with him when NATO bombed Serbia in 1999 to halt the mass killings and expulsion of ethnic Albanians from Kosovo. Nikolic broke away in 2008 when the party split over EU integration.
Tadic, a psychologist by profession and president since 2004, says the makeover is cosmetic. Handing power to the opposition would slam the brakes on Serbia's EU bid and reverse the process of reconciliation in the region, he says.
The West is also uneasy, but unlike in the past it has refrained from overt messages of support for the liberals.
"If the EU had no trust in what I'm doing, Boris Tadic would have already got their direct support," Nikolic told Reuters.
Under the liberals, Serbia closed a dark chapter with the arrest and extradition of Bosnian Serb genocide suspects Radovan Karadzic and Ratko Mladic, and in March became an official candidate for EU membership.
But voters look set to punish them for an economic downturn that has driven unemployment to 24 percent and weakened the dinar. The average Serb takes home 380 euros per month. Fellow ex-Yugoslav republic Croatia joins the EU next year, driving home for many Serbs just how far they have fallen behind.
Diplomats acknowledge they are uncertain about the substance of Nikolic's policy and his party's capacity to lead.
The next government will be pressed to reform the judiciary and pension system, cull the public sector and tackle crime and corruption. The EU is weighing up whether to open accession talks next year. They could last until 2020.
The EU also wants Serbia to loosen its grip on a northern slice of its former Kosovo province, which declared independence in 2008 but is locked in a de facto partition between the Albanian majority and 50,000 Serbs in the Belgrade-backed north.
NATO bolstered its Kosovo peacekeeping force with 700 extra German and Austrian soldiers ahead of the elections.
Some 6.7 million people are eligible to vote. Polling stations open at 7 a.m. (0500 GMT) and close at 8 p.m. (1800). Unofficial preliminary results are expected two hours later.
(Editing by Alistair Lyon)