Reuters International

Andrej Plenkovic, president of the Croatian Democratic Union (HDZ), reacts during a speech after exit polls in Zagreb, Croatia, September 11, 2016. REUTERS/Antonio Bronic

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ZAGREB (Reuters) - Croatia's conservative HDZ party will begin talks on Tuesday with its former junior coalition partner on forming a new cabinet after it won the most seats in a snap election, HDZ leader Andrej Plenkovic said.

The HDZ won 61 seats in the 151-parliament in the weekend vote, while the reformist centre-right Most ("Bridge") party came third with 13 seats. An alliance led by the HDZ's arch-rivals the Social Democrats took 54 seats.

"I agreed with Most leader Bozo Petrov to meet at 5 p.m. (1600 British time) to kick off talks between the two sides," Plenkovic told reporters.

The HDZ and Most sat uneasily together in a previous cabinet that collapsed in June after just five months.. The HDZ has since changed its leader and Plenkovic has said he wants to begin a new phase of cooperation.

An HDZ/Most coalition would need another small party or ethnic minority deputies on board to secure a parliamentary majority, but analysts say it could be stable provided Most accepts the limits of its influence as a junior partner.

Before the election, reformist Most put forward seven initial demands for supporting any cabinet.

These include changes to the financing of political parties, lower taxes for businesses, auditing of the central bank and an Adriatic economic zone -- a proposal that would likely require consultation with Croatia's European Union partners.

"We have understanding for some demands, but some require more detailed talks," Plenkovic said.

He said the HDZ was ready to talk to other potential partners, but that Most seems "a natural partner for forming a new cabinet".

Last year post-election coalition wrangling between the two biggest parties and Most lasted more than two months. Some analysts say that Most's current demands are not relevant to a key challenge awaiting the next cabinet - boosting Croatia's moderate economic recovery.

Any government will struggle to deliver reforms being urged by the EU, which is monitoring Croatia's debt-burdened economy and an investment environment it sees as bureaucratic and unfriendly to business.

(Reporting by Igor Ilic; Editing by Catherine Evans)

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