By Ellie Tzortzi

BELGRADE, May 9 (Reuters) - A tight race between nationalist Radicals and pro-Western Democrats in Sunday's Serbian general election will be closely watched by investors, neighbours and the European Union as its outcome ripples across the Balkans.

Those onlookers are hoping for clarity and stability in a country which is holding its 10th nationwide ballot in eight years.

While a Democrat-led government could speed Serbia's EU accession, a Radical-dominated coalition could make the neighbours nervous and prompt them to seek faster entry for themselves.

But analysts say the Radicals have a pragmatic approach to the need for foreign capital and would not necessarily scare off investors.

"Investors are not looking as much at who will govern, but at who can govern without there being an election again next month or next year," said Jens Bastian, economist for the European Agency for Reconstruction, which runs EU assistance programmes in parts of the former Yugoslavia.

"They are trying to identify a coalition that will have staying power for more than two years, which would already be a success, considering recent history."

In all the years since Slobodan Milosevic was ousted in 2000, the balance tipped in favour of the pro-Western bloc at the last minute. But this time, fuelled by Serb anger at Kosovo's secession in February, the nationalists could prevail.

A nationalist government in Serbia could have a ripple effect, encouraging separatist sentiment in Bosnia, where ethnic Serbs resent sharing a country with Bosnian Muslims and Croats.

Nationalist desires to partition Kosovo and annex the Serb minority to Serbia could also harden latent Albanian separatist sentiment in southern Serbia and Macedonia, another ethnically fragile former Yugoslav republic.

Serbia's influence and its hard-to-get attitude have Brussels bending over backwards to woo Belgrade, often stretching EU rules in the hope of defusing trouble in the backyard.

Sabine Freizer of the International Crisis Group think-tank said whatever happened on Sunday, the European Union should stop treating Serbia as a special case deserving concessions, and apply the same standards as for other aspirant members.

"It is not helpful for the EU to condition progress for other parts of the Balkans on Serbia's progress," she said.

Only Croatia, already advanced on the way to EU membership, would be let into the EU on its merits, said Dragana Ignjatovic, analyst for business intelligence firm Global Insight.

"For all other countries it's going to be harder", she said, as the EU prefers bloc entry and that slows everything to Serbia's pace.

HOSTAGES OF SERBIA

Ignjatovic said investors would be more comfortable with the Democrats, but not necessarily put off by the Radicals.

"Despite the populist rhetoric, the Radiÿ

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