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* Ruling DPS party-led alliance wins, but has to seek

partners

* Small ethnic Muslim, Croat parties seen as DPS coalition

partners

* EU and NATO membership is strategic goal

By Aleksandar Vasovic and Petar Komnenic

PODGORICA, Oct 15 (Reuters) – Montenegro’s ruling alliance

will have to form a coalition government with lawmakers from

ethnic minorities after voters disillusioned with economic

stagnation and corruption denied it a majority for the first

time in 11 years.

With nearly all the votes counted after Sunday’s election,

the alliance of Milo Djukanovic’s Democratic Party of Socialists

(DPS) and two small parties looked set to get 39 seats in the

81-seat parliament.

Djukanovic, as either prime minister or president, has been

the dominant political figure in the Balkan nation since

communist Yugoslavia collapsed 20 years ago. He resigned in 2009

to give way to his hand-picked successor, Igor Luksic, but

remained at the helm of the party.

He has not said whether he will become prime minister of the

country that wants to join the European Union, but his alliance

is all but certain to form the government because of the diffuse

nature of the opposition.

Djukanovic will have to woo the Bosniac Party of ethnic

Muslims with three parliamentary seats, and the Croatian Civic

Initiative with one deputy. Both were part of the previous

ruling coalition.

However, analysts said the lack of a majority marked a

turning point in Adriatic state of 680,000 people that split

from a state union with Serbia in 2006.

“The drop of the DPS’s (popularity) is obvious … voters

are no longer ready to accept the same messages and support the

ruling coalition,” said Zlatko Vujovic, director of CEMI, a

non-governmental election monitor.

“From now on the opposition will have a chance”.

CEMI gave the DPS alliance 45.6 percent of the vote, by an

unofficial count. Official results will be released later in the

week.

CORRUPTION

While Djukanovic is still seen as the champion of

independence, him and his party have been dogged by accusations

of graft and cronyism, which he has consistently dismissed, and

most Montenegrins perceive corruption as widespread.

Italian prosecutors accused him of involvement in massive

cigarette smuggling during Yugoslavia’s international isolation

in the 1990s, but he was cleared of all charges.

Montenegrins, whose average salary is 480 euros ($620), the

currency Montenegro unilaterally introduced as its own in 2002,

voiced a mixture of scepticism and resignation on Monday.

“Who else but Djukanovic? He has led us this far and he can

lead us onwards,” said Miso Nikolic, 45, a metal worker from the

capital Podgorica.

The DPS has made EU and NATO membership a strategic goal.

After Croatia, due to join the EU next July, Montenegro is the

only Balkan country that could become a member in this decade,

as Serbia, Macedonia, Albania and Bosnia are way behind.

But the new government faces a stagnant economy and rising

unemployment and will have to work hard to strengthen the rule

of law and fight rampant corruption and nepotism, as required by

Brussels, which decided in June to open accession talks.

“Whether it is Djukanovic or whoever else, we will still be

poor and the society will remain corrupt,” said Jovo Novakovic,

68, a pensioner from Podgorica.

Per capita output is 5,200 euros ($6,700), barely a fifth of

the EU average.

The pro-government Pobjeda daily newspaper reported the DPS

had lost power in Djukanovic’s hometown of Niksic in the north,

in an early municipal vote also held on Sunday.

“Although it won the most votes, the ruling coalition saw a

drop of voters’ confidence,” the opposition Dan daily said on

its front page.

($1 = 0.7712 euros)

(Editing by Alison Williams)