(Adds U.S. state department reaction, background)

By Michelle Nichols

UNITED NATIONS, March 26 (Reuters) - The U.N. mediator for Kosovo recommended on Monday supervised independence for the breakaway Serbian province, a move fiercely opposed by Belgrade but strongly backed by the United States and European Union.

"Independence is the only viable option for a politically stable and economically viable Kosovo," special envoy Martti Ahtisaari said in a report to the U.N. Security Council and U.N. Secretary-General Ban Ki-moon, who backs the proposals.

Ahtisaari, a former Finnish president who is expected to brief the Security Council next month, said Kosovo independence from Serbia should be "supervised and supported for an initial period by international civilian and military presences."

Serbian President Boris Tadic said Kosovo independence would be unacceptable and that further negotiations should be held to find a solution. Kosovo Prime Minister Agim Ceku said independence was the only realistic and practical option.

The European Union as well as the United States backed the proposals, which were produced after a year of fruitless negotiations among the leaders of Kosovo and Serbia. The United States said it expects the Security Council to vote by summer.

"These are fair, balanced and the best means to advance regional stability," said U.S. State Department spokesman Tom Casey.

But Russia, a permanent member of the Security Council with veto power, backs Serbia and has called for the talks to continue, if necessary under a new mediator. Moscow insists a solution must be acceptable to both the majority ethnic Albanian Kosovars and the Serb minority in the province.

Ahtisaari said, "No amount of additional talks, whatever the format, will overcome this impasse."

Germany, the current EU president, said it strongly supported Ahtisaari's plan and "trusts that the Security Council will live up to its responsibility and hopes that it will endorse the proposal in a timely manner."

KOSOVO IN LIMBO

Kosovo has been under U.N. administration since 1999, when NATO launched bombing raids to stop Serb forces from driving out the province's ethnic Kosovo Albanians, who comprise 90 percent of the population.

"While independence for Kosovo is the only realistic option, Kosovo's capacity to tackle the challenges of minority protection, democratic development, economic recovery and social reconciliation on its own is still limited," Ahtisaari said, in justifying international supervision.

The Ahtisaari plan would give independence to the 90 percent ethnic Albanian-majority but provides for a European Union overseer, an EU police mission alongside the current 16,500-strong NATO peace force and broad self-government for the remaining 100,000 Serbs.

Ten thousand Kosovars died and almost 1 million fled during a 1998-99 Serbian war against separatist guerrillas. The crackdown drew NATO into its first "humanitarian" war and the West sees no prospect of restoring Serb rule.

Kosovo is the last major dispute following the breakup of Yugoslavia marked by bloody wars in the 1990s.

U.S. Undersecretary of State Nicholas Burns said in Brussels that he expected five to seven weeks of consultations with Kosovo Albanian leaders, the Serb government and members of the Security Council to try to format the best resolution.

British Foreign Minister Margaret Beckett said in a statement that Ahtisaari's proposals gave Kosovo clarity over its future, which "would enable the Balkan region as a whole to draw a line under the conflicts of the recent past."

In the report, Ahtisaari said Kosovo's "current status of limbo cannot continue," adding that: "Pretending otherwise and denying or delaying resolution of Kosovo's status risks challenging not only its own stability but the peace and stability of the region as a whole."

(Additional reporting by Brussels, Belgrade, Pristina, London and Washington bureaux)

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