Croats vote with eye to EU, jobs, graft

ZAGREB, Nov 25 (Reuters) Croats started voting today in a tightly contested national election expecting their new leaders to root out corruption, overhaul the economy and take the country into the European Union in the next four years.

The main rivals, Prime Minister Ivo Sanader's conservative Croatian Democratic Union (HDZ) and the Social Democrats (SDP), both pledge exactly that.

There is more nuance than difference between them, mostly over economic policy -- the SDP is more state-oriented.

Neither party is likely to be able to form a government on its own, so lengthy coalition talks are possible. Voting stations close at 2330 IST with exit polls expected shortly afterwards, and first preliminary results at midnight.

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

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

But his government has been tainted by corruption scandals, and critics say the GDP figures have not translated to better 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 recreational boxer, he has appealed to young, urban voters with straight-talking tactics, such as admitting to trying marijuana.

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

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

The country needs to reform its inefficient judiciary and bloated public administration, crack down on corruption and cut subsidies to indebted state firms, particularly shipyards, to prepare for competition within the EU.

''We've seen the ones, we've seen the others (HDZ - SDP) and I can't say who'd be better,'' said Marko, 72, one of Croatia's one million pensioners, or almost a quarter of the population.

''But what we need is less corruption, otherwise it will be a disaster.'' REUTERS SZ HT1237