By Matt Robinson
BELGRADE (Reuters) - Ruling coalition lawmaker Jorgovanka Tabakovic was nominated as the new governor of Serbia's central bank on Sunday, part of a move by the Socialist-led government to step up control over the bank in the face of stern criticism by the EU and IMF.
Serbian President Tomislav Nikolic nominated Tabakovic, an economist by education and a close ally of the president, to replace Dejan Soskic, who resigned last week citing threats to the bank's independence.
The choice had been widely expected, as the government tries to hold the bank to its promise of more expansive fiscal policies in order to halt the country's slide into recession.
Parliament is expected to debate the nomination on Monday.
It follows the adoption on Saturday of amendments to the law on the National Bank of Serbia, creating a powerful, parliament-appointed supervisory body represented on the bank's executive board and giving the assembly responsibility for appointing its entire top management.
The European Union, which Serbia wants to join, and the International Monetary Fund, which it wants to tap for new funding, have both decried the law as a serious threat to the independence of the bank.
It is certain to deepen doubts in the West over the new government's commitment to the largely reformist, pro-EU path Serbia has taken since the ouster of late Serb strongman Slobodan Milosevic in 2000.
The EU is watching closely, unnerved by the return to power of a socialist-nationalist political alliance that was last in government at the tail end of Milosevic's disastrous 13-year-rule, when Serbia was mired in war and hyperinflation.
Tabakovic, 52, is originally from Kosovo, the former southern Serbian province that declared independence in 2008 with the backing of the West.
Tabakovic graduated in economics from the University of Pristina and worked in accounting and banking in Kosovo until the 1998-99 war, which ended in 11 weeks of NATO bombing to drive out Serb forces under Milosevic.
As a member of the ultranationalist Serbian Radical Party, Tabakovic was a minister in the last government under Milosevic before his overthrow in October 2000.
When the Radicals splintered in 2008, Tabakovic joined Nikolic's Serbian Progressive Party (SNS), a nationalist party that is now the largest in Serbia's coalition government under Socialist Prime Minister Ivica Dacic.
At the time the SNS was formed, a leaked cable from the U.S. embassy in Belgrade said Tabakovic's economic policies reflected her "socialist roots".
"Beneath the veneer of support for progress toward Europe, the SNS's economic agenda is one that looks backward to socialist and protectionist measures," the cable said.
The coalition says the bank's independence will not be compromised, but that it should work in closer harmony with the government as it tries to fire up an economy that contracted 1.3 percent in the first quarter of this year and 0.6 percent in the second.
Under Soskic, Serbia has the highest official interest rates in central and eastern Europe at 10.25 percent.
(Writing by Matt Robinson; Editing by Rosalind Russell)