By Maja Zuvela
BELGRADE (Reuters) - Serbian Prime Minister Ivica Dacic moved to oust his finance minister on Tuesday, rattling the year-old coalition and risking a snap election that would almost certainly delay talks on joining the European Union.
Dacic told a news conference he had proposed to his coalition partners that the government move on "without (Mladjan) Dinkic and his URS (United Regions of Serbia) party."
The biggest party in the coalition, the Serbian Progressive Party (SNS), said it would respond to the proposal on Wednesday.
"If SNS does not accept this, there are two possible choices ahead - elections or a coalition without the SPS," Dacic said, referring to his own Socialist Party of Serbia (SPS).
Without the 16 seats of Dinkic's URS, the coalition would still retain a slim majority in parliament. But his departure would likely unnerve investors worried about Serbia's growing budget gap and public debt, which have all but buried hopes of a new precautionary loan deal with the International Monetary Fund.
"This is very bad timing given that global markets are still quite nervous and there's a bit of a question about the budget financing story anyway," Standard Bank analyst Timothy Ash told Reuters.
"I don't think Dinkic himself was absolutely central but his participation and his party's participation in the coalition was important to counterbalance the center-left Dacic," he said.
Dinkic has served as central bank governor, finance minister and economy minister under several administrations since the ouster of Serbian strongman Slobodan Milosevic in 2000, when the country began emerging from a decade of war and economic turmoil.
He led an unpopular budget reform process this year, trying to stabilize Serbia's finances and pull the economy out of recession. Analysts say he would have taken a harder line in cutting public sector wages and pensions, but was reined in by Dacic's Socialists who were strongly against.
On Sunday, Dinkic offered to give up his economy portfolio as part of a cabinet reshuffle, but retain the position of finance minister.
Dacic said the offer fell short.
"Economy and finance are the most important issues for the future of Serbia and we need an additional impetus here," he said. "We have no time for mistakes."
In response, Dinkic accused Dacic of "pure politicking" to cement his own position as premier.
The nationalist SNS is riding high in opinion polls and stands to gain the most from a new election, which would likely cement its dominance of the Serbian political scene.
But elections, and the weeks or months it would take to form a government, will cost valuable time in shoring up national finances and implementing a landmark accord between Serbia and its former Kosovo province, brokered in April by the EU.
That would likely delay the start of EU accession talks, penciled in for January.
"I am not sure Serbia can afford early elections in terms of lower growth, lower budget revenues, bigger budget deficit," Ash said. "It's going to make life more difficult."
(Additional reporting by Valerie Hopkins; Editing by Matt Robinson/Ruth Pitchford)