By Ellie Tzortzi

BELGRADE, April 23 (Reuters) - The European Union should not make concessions to Serbia in the hope of helping pro-EU parties win a May election as such a move could backfire and boost nationalists, a leading think-tank said on Wednesday.

The report by the International Crisis Group (ICG) said Serbian anger over the loss of Kosovo, its southern province which seceded with EU and U.S. support in February, was still simmering and would play a big role in next month's vote.

Brussels and Washington should now tone down their vocal support for the pro-EU Democratic Party, the ICG said, and not interfere by offering as a carrot a long-delayed pre-accession pact, the Stabilisation and Association Agreement (SAA).

"The public anger over Western support for Kosovo's independence is such that any attempt to pressure or even induce Belgrade into more cooperation risks strengthening the nationalist vote," the ICG noted.

"Should the EU offer to sign an SAA ... it could have significant undesired consequences", in the form of a "voter backlash" against the Democrats, who would be vilified by nationalists as traitors selling Kosovo, Serbia's cherished religious heartland.

Serbia's fragile government coalition of nationalists and pro-Western liberals collapsed in March over whether the country should pursue closer ties with the EU despite the bloc's support for the independence aspirations of Kosovo's Albanian majority.

Its secession sparked attacks on Western embassies and firms, raising fears Serbia would return to the virulent nationalism of the 1990s and create a domino effect of turbulence in neighbours such as Bosnia and Macedonia.

The ICG cited polls showing Kosovo was now at joint first place of voters' concerns along with unemployment and low living standards, all topics that traditionally provided the nationalist, populist Radical Party with plenty of rhetorical ammunition.

Serbs remained ambivalent about a future in the EU, it added. Although 70 percent of Serbs say they favour membership, only 43 percent would pick the EU over Kosovo if asked to choose.

The report said Brussels has mistakenly believed for years that Serbs would accept Kosovo's independence in return for quicker EU membership, and that it could help liberal parties by strengthening Serbia's "European perspective."

So it kept moving along the SAA, even though Belgrade had not fulfilled the main condition of handing over top suspects from the Yugoslav wars, such as Bosnian Serb former general Ratko Mladic, to the Hague war crimes tribunal.

Although the tactic proved to be mostly counterproductive, the EU was now pondering a repeat, the ICG wrote. EU foreign ministers will debate what to do at a meeting next Tuesday in Luxembourg, with most states favouring some kind of gesture.

Offering Serbs the pact without the Hague condition would be "a misguided attempt to support democratic forces before the election and orchestrate a policy shift in Belgrade," ICG said.

"Appeasement has already failed in the Balkans for over a decade and a half."

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