Serbian political parties are expected to start negotiations on the formation of a new government Monday after the surprise win of nationalist Tomislav Nikolic in presidential polls.
Nikolic upset the odds to defeat incumbent Boris Tadic on Sunday but vowed to pursue his predecessor's drive for the Balkans nation to join the European Union.
One-time ally of the late Serbian strongman Slobodan Milosevic, Nikolic led with 50.21 percent over 46.77 for Tadic, according to preliminary results from Serbia's republic electoral commission RIK based on 40.67 percent of votes counted.
Thousands of Nikolic supporters gathered in central Belgrade and other Serbian towns late Sunday, honking their horns in celebration.
Tadic quickly conceded defeat congratulating Nikolic, who promised to steer a pro-European course, on "a fair and well-earned victory".
"Serbia will not turn away from the European path," Nikolic said.
But a recent convert to the EU cause he has warned in the past he would not join the 27-member bloc at any cost, making a breakaway Kosovo the red line for EU membership.
Tadic, 54, who brought the once international pariah state to the European Union's doorstep, warned it would be a "tragic mistake" if Serbia abandoned its EU course.
Serbia got EU candidacy status in March but has not yet been given a date to open membership talks.
To get into Brussels' good books Tadic handed over last year the last remaining fugitives from the UN war crimes court hiding in Serbia, Bosnian Serb general Ratko Mladic and Croatian Serb leader Goran Hadzic.
He also agreed to talks between Belgrade and Pristina aimed at improving relations between Serbia and Kosovo -- a key condition for EU integration.
Surveys conducted just ahead of the second round had projected that Tadic, the Democratic Party leader, would win comfortably with up to 58 percent of the vote.
"This was an electoral earthquake, a totally unexpected result," political analyst Slobodan Antonic said on Serbia's RTS state television.
While the ruling parties did well in parliamentary elections two weeks ago "maybe voters now decided it was the time to punish them a bit", he said.
Other analysts blamed the low turnout of 46.86 percent of voters and the high number of invalid votes at some three percent for the upset.
During the election campaign Nikolic, who lost to Tadic in 2004 and 2008, tapped into voter discontent about the worsening economic situation in Serbia, which has one of the highest jobless rates in Europe at 24 percent.
The unexpected result will impact the formation of Serbia's government as it could break up an earlier agreed pro-European alliance between Tadic's Democratic Party and the Socialists, the third force in the future parliament.
Late Sunday top Socialist official Dusan Bajatovic said there was "no reason to change the deal now", raising the possibility of a cohabitation with nationalist Nikolic as president and a government led by the Democrats.
However, he pointed out that as president it would be Nikolic who will hand out the mandate to a party to form a government.
In theory the pro-Democratic bloc is stronger in parliament but the Socialists, founded by Slobodan Milosevic have already worked together in a coalition in the 1990s with Nikolic as deputy prime minister under the late strongman leader.
Nikolic, 60, began his transformation from an ultranationalist to a pro-EU populist in 2008 in founding his Serbian Progressive Party.
He dropped much of his previous party's hardline positions while keeping his populist rhetoric.