By Matt Robinson
BELGRADE (Reuters) - Pro-Western Boris Tadic will bid on Sunday for another five years as Serbia's president and the right to lead the nation into EU membership talks, challenged by rightist Tomislav Nikolic who has threatened to contest the result in the streets.
Tadic is tipped to defeat Nikolic in the presidential election for the third time since 2004 as Serbia slowly sheds the legacy of a decade of war and isolation under late strongman Slobodan Milosevic.
A Tadic victory would keep power firmly in the hands of his Democratic Party.
The Democrats are in talks to revive a governing coalition with Socialist Party formerly led by Milosevic, an uneasy alliance with a patchy record on reform which would keep the Balkan country edging towards EU accession.
Opposition allegations of fraud in parliamentary and first-round presidential elections two weeks ago could yet cause an upset, or cast a shadow over the result of Sunday's run-off if Nikolic carries out a threat to call supporters into the streets.
Election authorities and foreign monitors found no evidence of the 500,000 votes Nikolic says were forged.
Nikolic's Serbian Progressive Party says its monitors will confiscate ballot boxes and close polling stations if they observe irregularities.
"Our intention is to fight. What else can we do?" Nikolic's deputy, Aleksandar Vucic, told Serbian state television. "We are running to beat the thieves and liars."
A former member of the ultranationalist Radical Party, Nikolic was in government with Milosevic when Serbia was bombed by NATO in 1999, but since last losing to Tadic in 2008 he has tried to reinvent himself as a pro-European conservative.
Tadic, who beat Nikolic by less than one percentage point in the first round, says his opponent's change in direction is purely cosmetic.
Handing power to Nikolic, he says, would slam the breaks on reform and reverse the process of reconciliation between Serbia and its ex-Yugoslav neighbors since Milosevic's ouster in 2000.
"We haven't crossed the Rubicon, but we are on the verge of it, and that's why we need another five-year term to consolidate the process," Tadic told Reuters in an interview.
Lean, tanned, and campaigning with his sleeves rolled up, Tadic, 54, has crafted an image of a reliable family-man and safe pair of hands in a region that has seen enough loose cannons.
Nikolic, 60, is a dour former cemetery manager. A stiff and uninspiring orator, his straight-talking, man-of-the-people manner nevertheless appeals to rural Serbs and voters tired of the grinding transition from socialism to capitalism.
The West is watching closely, encouraged by Nikolic's conversion to the ultimate aim of EU membership but unsure about the substance of his policy or his capacity to rule.
At least rhetorically, the two sides differ little in economic policy or their approach to Kosovo, Serbia's former province where Belgrade is propping up a de facto ethnic partition four years after the Albanian-majority territory declared independence.
The EU made the country of 7.3 million people an official candidate for membership in March, and could set a date for talks early next year if Belgrade takes steps to improve relations with Kosovo.
A Nikolic victory likely usher in a difficult period of "cohabitation" with a Democrat-led government. Under the constitution, the prime minister is more powerful than the president, but the head of state can hold up legislation.
Nikolic's party narrowly won the parliamentary vote but the Democrats, who came second, are widely expected to make their coalition deal with the Socialists and form a government.
Nikolic accuses Tadic of overseeing a creeping culture of cronyism, deepening government control over the media and an economic slide that has seen unemployment reach 24 percent.
The economy will struggle to avoid stagnation this year, pummeled by the crisis in the euro zone, the Balkans' main source of investment and trade.
Political uncertainty has seen the dinar currency fall 5.81 percent against the euro this year, and in January the International Monetary Fund froze a standby loan deal over Serbia's rising budget deficit and public debt.
Analysts say the next government will have to cap pensions and public sector wages, cut jobs in state-run companies and accelerate the sale of key state assets.
Polls open at 7 a.m. (0500 GMT) and close at 8 p.m. (1800 GMT). An unofficial projection of results is expected by 10 p.m. (2000 GMT).