Croatia has swung back to the right in a general election and the nationalist Democratic Union (HDZ) of challenger Ivo Sanader has claimed victory.
If confirmed, the outcome would restore to power a party once shunned in the West under the late strongman Franjo Tudjman, which Sanader says he has moderated and rebuilt as a modern European conservative movement.
The HDZ ruled post-communist Croatia from 1990 to 2000, frequently defying Western pressure on human rights and democratic standards. Analysts said investors would weigh an HDZ victory carefully and wait to see its true colours.
But Prime Minister Ivica Racan, whose Social Democratic Party (SDP) was heavily outpolled, said late on Sunday he might still save his seven-party coalition once all votes, including those from outside the country, were counted.
And President Stejpan Mesic, who must call on one or the other to form the next government, said he would be in no hurry to name the prime minister-elect.
"This is a brilliant victory," Sanader insisted repeatedly as his party celebrated their upset. "We are the clear winners."
"It's over when it's over and it's not over yet," said Racan, after appearing to concede defeat earlier in the evening.
Partial results gave the HDZ 62 seats to the SPD's 34. If the current alliances hold, the three-party HDZ-led bloc would have a projected 72 seats versus 65 for the SPD-led bloc.
The Pensioner's Party scored a breakthrough with its first three seats in parliament and was not yet committed to either side.
Croatia's parliament has 140 permanent seats from 10 electoral districts plus eight set aside for minorities and up to 14 allotted to the disaspora, depending on its turnout in the election.
The disapora is mostly ethnic Croats in next-door Bosnia, who strongly support the HDZ.
The election was Croatia's fourth since independence from the disintegrating Yugoslavia in 1991 and the closest race yet with the lowest turnout, projected at around 60 percent compared to 85 percent in the first ballot as an independent state.
Of the 10 districts the SPD won only Istria, the northern Adriatic peninsula closest to European Union member Italy and was in a close race for the capital, Zagreb.
All 11 parties in parliament favour EU membership.
Sanader was quick to stress his international credentials. He may have to deal with new war crimes indictments against Croatian officials from The Hague war crimes tribunal over atrocities against Serbs in the intermittent 1991-95 war.
"We will be responsible for all international obligations, including cooperation with the war crimes tribunal. This is not an electoral trick but a responsible policy," Sanader said.
He has not specifically committed himself to arresting General Ante Gotovina, who went underground in 2001 to avoid prosecution and whose handover is urgently sought by the Hague.
"Croatia will be very clear and determined," he said. "We want to join NATO in 2006 and the European Union in 2007, which is ambitious but feasible."