BELGRADE (Reuters) - Serbia's centre-right Progressive Party, which won the March election by a landslide, said on Tuesday it had offered a place in a coalition government to the Socialists of outgoing Prime Minister Ivica Dacic, despite deep differences over austerity.
The two parties have been in government together since mid-2012, but the Progressives forced a snap election last month saying they needed a stronger mandate to overhaul the bloated public sector and stabilise Serbia's shaky finances.
The Socialist Party (SPS) has opposed radical belt-tightening, fearing a backlash from its support base among public sector workers and pensioners.
Nevertheless, Progressive Party (SNS) leader and Serbia's next prime minister, Aleksandar Vucic, said he had offered a place in a new coalition cabinet to the Socialists and a party of ethnic Hungarians.
"I expect them (the Socialists) to take a decision on their participation," Vucic told a meeting of his party.
The prospect may unnerve investors anxious to see Vucic keep to his promise to slash state outgoings and rein in the budget deficit and public debt, as Serbia tries to capitalise on the start of European Union accession talks and lure investment.
Vucic takes power on an unprecedented mandate from voters. His Progressives took 158 seats in the 250-seat parliament in the March 16 election. The Socialists came second with 44 seats.
Though he has enough seats to rule alone, analysts say Vucic wants to form a broader coalition to shore up support for the tough measures he is promising as Serbia seeks to clinch a new precautionary loan deal with the International Monetary Fund.
Partnership with the Socialists would also give the new government a two-thirds majority in parliament, enough to change the constitution if necessary.
The cabinet is expected to be installed by the end of April.
Slavica Djukic-Dejanovic, a senior member of the Socialist Party, said the party would decide on the offer in the next few days.
"(Party leader) Dacic is talking to Aleksandar Vucic intensively, and there is a good chance that we will participate in the future government," Djukic-Dejanovic told state news agency Tanjug.
(Additional reporting and writing by Matt Robinson; Editing by Janet Lawrence)