Nationalists neck and neck with the left as Croatian election delivers split vote

Croatia's election seemed to be heading for a tight finish last night with parties of the left and right neck and neck as yesterday's votes were counted.

Earlier reports had suggested that the Nationalists would return to power. But the latest results indicated that there may be a hung parliament with little to choose between the two sides.

Returns released by the state-run electoral commission, with up to 40 per cent of votes counted, gave the nationalist bloc about 72 seats. Parties associated with the Prime Minister, Ivica Racan, were projected to win 65 to 69 seats.

The electoral system is so complicated ­ with some 350,000 voters abroad and minorities, including Serbs, Italians, Hungarians and Bosnian Muslims, to be counted ­ that the final result will not be known until 5 December. Analysts had at first said victory was likely for parties of the nationalist right, led by the Croatian Democratic Union (HDZ).

"This is the fantastic victory for the HDZ," Ivo Sanader, its leader, said at party headquarters, before the race tightened. "It is an order from Croatian voters that the HDZ should get a mandate to form the new government. Undoubtedly, the HDZ is the winner of the elections."

But Mr Racan was unwilling to concede defeat. "It is over when it is over, and it is not over yet," he said late last night.

The HDZ, founded by the late Franjo Tudjman, led the country into the war of independence from Yugoslavia in 1991. The party isolated Croatia from the West during the 1990s, imposing an ideology of national purity similar to that of the Second World War Ustashe, a Nazi puppet regime.

It lost to Mr Racan's Social Democratic Party (SDP) after Tudjman's death in 2000 and has since distanced itself from his most extreme policies, particularly his plan to divide Bosnia-Herzegovina with Serbia's former leader Slobodan Milosevic.

The HDZ's support was bolstered during the most recent election campaign by the support of the Catholic Church. Leading clergy had called on people "not to vote for those who favour abortion, euthanasia and same-sex marriages", a reference to parts of Mr Racan's coalition.

Almost 95 per cent of Croatians are Catholics.

During Mr Racan's rule, Croatia's foreign debt rose to almost ¤20bn (£14bn). Unemployment is 18 per cent and ordinary people have seen little progress despite the success of the country's main industry, tourism.More than a million retired people barely survive, with 70 per cent receiving pensions of only ¤120 a month.

By spring next year, the European Union is expected to give an interim assessment of Croatia's suitability to become a member. The outcome of yesterday's election could be a stumbling block.

One condition for membership is the extradition of General Ante Gotovina to the international war crimes tribunal in The Hague. He was indicted for war crimes against Serbs in 1995. Another condition is the improvement of minority rights. More than 200,000 Serbs were forced to leave eight years ago, after the general crushed their Belgrade-backed rebellion.

With the election too close to call last night, one possibility was the emergence of a coalition government embracing both the pro-Western and nationalist blocs. Croatian President Stipe Mesic, the man with the responsibility of deciding which parties to ask to form the next administration, said recently that a grand coalition government might be in the best position to satisfy the EU entrance criteria.