ZENICA/GRADISKA, Bosnia (Reuters) - Divisive nationalism has dominated campaigning for Bosnia's presidential and parliamentary elections on Oct. 2, suggesting reformists keen to modernise a dysfunctional economy and improve rule of law have scant chance of winning.
Bosnia has been going through its gravest political crisis since its 1990s war with nationalist Serb leader Milorad Dodik taking concrete moves towards secession of the autonomous Serb Republic (RS) from the Balkan state, his long-stated goal.
"This current Bosnia is not acceptable to us," Dodik told supporters in the northern town of Gradiska on Wednesday. "It most often proves to be a burden..., stopping us from progress."
Dodik has touted his friendship with Russian President Vladimir Putin while accusing the West of initiating the war in Ukraine, which Russia invaded in February.
He has said that Christians and Muslims cannot live together, disregarding centuries of co-existence among Orthodox Serbs, Muslim Bosniaks and Catholic Croats in Bosnia.
Last year, Dodik pushed through legislation to take the RS out of Bosnia's joint judiciary, tax and defence institutions and set up regional replacements, though he put off implementing the moves after being hit with U.S. and British sanctions.
But his words and actions have reawakened fears among Bosniaks who suffered the highest casualties in the country's 1992-95 war, which erupted after Bosniaks and Croats voted for independence from Serbian-dominated Yugoslavia.
"For the first time I've become scared for Bosnia," said Nedzad Hadzimusic, a Bosniak coffee shop owner in the central town of Zenica. "I am not a nationalist, but I will vote for SDA (Party of Democratic Action) in spite of everyone."
SDA, the largest Bosniak party, has campaigned on a ticket of protecting Bosniaks and the integrity of the post-war state, which SDA leader Bakir Izetbegovic said was paid for in blood.
The party is also at odds with the Croatian Democratic Union (HDZ), its coalition partner, over a proposed electoral reform which would allow Croats to choose their member of the inter-ethnic presidency for the first time.
Croats accuse majority Bosniaks, with whom they share Bosnia's other autonomous region, the Bosniak-Croat Federation, of electing Croats who do not represent their national interests, and have threatened "territorial reorganisation" that would block the next Federation government.
"We have to have our representative who we elect and not the one imposed by someone else," said HDZ supporter Mirjana Lovric at a party rally in the central town of Zepce.
Bosnians will be voting for new Serb, Croat and Bosniak members of the weak, Sarajevo presidency as well as deputies in the national, regional and cantonal assemblies.
A system of ethnic quotas at various levels of government, agreed under the 1995 Dayton peace treaty, largely locks in the power of nationalist factions that fuelled the 1990s war.
'ALL OR NOTHING' APPROACH
Opposition leaders condemn the nationalists' focus on identity themes at the expense of real-life concerns like soaring inflation, emigration that has caused labour shortages, and the need for laws to ease taxes and red tape hampering business and to tackle graft and organised crime.
"Each time you see those who (promise to) protect you from others who will attack you..., you can rest assured that at that moment 20 to 50 million marka have been stolen," said opposition lawmaker Sasa Magazinovic, referring to Bosnia's currency.
"These are smokescreens used by criminals in suits and ties with political offices to finish their criminal deals," he said.
Diplomats say that all politicians in Bosnia bear equal responsibility for the disarray as nobody wants to compromise for the wider good of a population still suffering widespread deprivation amid high unemployment and meagre investment.
"It's the 'all or nothing' approach - you can't get anywhere that way or expect the international community to wave a magic wand and solve it," said a Western diplomat, speaking on condition of anonymity.
The European Union and NATO have stepped up their monitoring of Bosnia lately, worried that instability from the Ukraine war might spread there. The EU has nearly doubled its EUFOR peacekeeping force in Bosnia.
($1 = 2.0106 marka)
(Writing by Daria Sito-Sucic; Editing by Mark Heinrich)