Corruption and economy to the fore as Croats vote

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ZAGREB, Nov 25 (Reuters) Croats vote today in a tightly contested national election, expecting whoever wins to tackle corruption, overhaul the economy and take their country into the European Union.

The main rivals, Prime Minister Ivo Sanader's conservative Croatian Democratic Union (HDZ) and the Social Democrats (SDP), have both pledged to do all of those.

Nuance rather than difference separates them, mostly on economic policy -- the SDP is more state-oriented.

Neither party is likely to be able to form a government on its own and long coalition talks are possible.

The HDZ has ruled Croatia for most of its 16-year existence as an independent state. It was the SDP that launched real reforms in 2000, ridding it of the previous decade's image of war and nationalism and setting the country on course towards EU and NATO membership.

Sanader's reformed HDZ returned to power in 2003 and continued along the same path to win Western trust, achieving healthy economic growth and an ever-better investment profile.

However, his government has been tainted by corruption scandals and critics say the growth figures have not translated into higher living standards.

Opinion polls give a slight edge to the SDP and its new leader, 41-year old Zoran Milanovic. A lawyer by education and a recreational boxer, he has appealed to young, urban voters with his straight-talking tactics, such as admitting that he had tried marijuana.

Asked what the SDP's main priorities would be, Milanovic told Reuters: ''Corruption, starting from our own ranks, and economy, economy, economy''.

The HDZ's power base is older and more rural, and counts on the extra seats reserved for the traditionally conservative Croatian diaspora. Those seats could bring about a tie, forcing the parties to seek coalition partners.

Financial markets expect little impact from the election as the country's political and economic agenda is in practice dictated by EU membership talks, which Zagreb opened in 2005.

''The straitjacket of EU accession, on top of new, tougher conditions on financial markets means that, irrespective of what the new government believes in the beginning, they won't have as much room for manoeuvre,'' said financial analyst Goran Saravanja of Zagrebacka Banka.

Croatia needs to reform its judiciary and civil service, tackle corruption and cut subsidies to indebted state firms, especially shipyards, to prepare for competition in the EU.

Marko, 72, one of Croatia's one million pensioners -- almost a quarter of the population -- said it was difficult to distinguish between the two parties, adding: ''But what we need is less corruption, otherwise it will be a disaster.'' Reuters TB VP0515

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