Tomislav Nikolic pledged to keep Serbia on its pro-European course after his shock election as president, winning a cautious welcome on Monday from the EU and neighbouring states still unnerved by his links to the bloody collapse of Yugoslavia.
A dour former cemetery manager known by the nickname "Gravedigger", Nikolic beat liberal Boris Tadic in a close-run vote in which less than half the electorate turned out, breaking the almost 12-year hold on power of the reformists who ousted late Serb strongman Slobodan Milosevic in 2000.
"Serbia will not stray from its European path," Nikolic, 60, told jubilant supporters.
The rightist leader of the opposition, last in power with Milosevic when Serbia was bombed by NATO in 1999, says he now shares the goal of taking the Balkan country of 7.3 million people into the EU.
Challenging his commitment, the European Union said it expected Nikolic to show "statemanship" in continuing the process of reconciliation between Serbia and its ex-Yugoslav neighbours and improving relations with its former Kosovo province.
"Serbia's European perspective is very concrete and we therefore hope to be able to rely on President Nikolic's personal dedication to achieve this aim," European Commission President Jose Manuel Barroso and Council President Herman Van Rompuy said in a joint statement.
Nikolic was in government with Milosevic in 1999 when Serbian forces expelled almost 1 million ethnic Albanians from Kosovo and NATO intervened with air strikes. He once said he wished Serbia were a province of Russia, and still advocates a policy of economic cooperation with East as well as West.
But tracking the Balkan country's gradual progress from pariah state to EU membership candidate in March, Nikolic has tried to reinvent himself as a pro-European conservative since splitting in 2008 from his firebrand mentor Vojislav Seselj, now on trial for war crimes in The Hague.
TADIC PUNISHED OVER ECONOMY, ELITISM
Contrary to dire warnings from some observers, the vote was "not a referendum for or against the EU", Nikolic said, adding that he would seek talks with German Chancellor Angela Merkel as Serbia's "main ally in the EU".
It was third time lucky for Nikolic, who had twice lost to Tadic but won on Sunday with 49.5% versus 47.4%. Analysts said he benefited from the low turnout of 46%.
Tadic was abandoned by Serbs fed up with what many saw as a culture of elitism and complacency that had crept in under the reformers in power since 2000.
Nikolic's man-of-the-people manner appealed to voters tired of the grinding transition from socialism to capitalism and an economic slowdown that has driven unemployment to 24%.
The region reacted with caution, but no drama.
DINAR WEAKENS, CDS SURGE
The Serbian dinar weakened against the euro on Monday on the post-election uncertainty. By late afternoon the dinar had dropped 0.9% to near an all-time low of around 114.5, dealers and traders said.
Serbian credit default swaps surged 22 basis points from the previous session's close on doubts over the next government.
Data from Markit showed that the cost of insuring exposure to Serbia rose to 430 bps from Friday's close of 408 bps. This is the highest level since May 10, as CDS have edged higher since Nikolic's Progressive Party won a May 6 parliamentary election.
As president, Nikolic is expected to hand the mandate to form a new government to the Progressives, which could upset a tentative ruling alliance agreed between Tadic's Democrats and the Socialists led by Milosevic's wartime spokesman Ivica Dacic.
Dacic said on Sunday the deal would stand whatever the result of the run-off. But negotiations have yet to begin in earnest, and he was quoted in the Serbian daily Blic as saying: "Of course, everything's now going to be more complicated."
Even if the Democrats do form the government, an awkward "cohabitation" with Nikolic as president could slow reforms necessary to revive the flagging economy, rein in the public debt and clinch talks on joining the EU.
