Slovenia tasked the mayor of its capital city Monday with forging a government to halt the euro zone member's slide back into recession, and he faces potentially weeks of tough coalition talks.

The European crisis claimed its latest scalp Sunday with the Social Democrats of prime minister Borut Pahor relegated into third place by voters angry over rising unemployment in the former Yugoslav republic.

Zoran Jankovic, the centre-left mayor of Ljubljana and former manager of Slovenia's largest food retailer Mercator, took 28 seats in the 90-seat parliament, and will need partners in government.

Forming a coalition will be difficult, said Tanja Staric, a political commentator for the Slovenian daily Delo.

Jankovic will have to offer a coalition to virtually all small parties in parliament, and the differences are big, Staric told Reuters.

The Alpine state of 2 million people was the fastest growing euro zone member 4 years ago, but its export-driven economy was badly hit by the global crisis and shrank by 8 percent in 2009.

After a mild recovery in 2010, figures released last week suggest another recession is on the way after the economy contracted 0.5 percent year-on-year in the third quarter.

The budget deficit soared to 5.8 percent in 2010 from zero in 2007.

Sunday's election result was an upset, with opinion polls predicting for weeks that victory would go to the centre-right Slovenian Democratic Party of former prime minister Janez Jansa.

PENSION REFORM

Jansa said that, given the tight result, he did not believe the next government would last for its 4-year mandate. Pahor's crumbled in May and was voted out in September, forcing a snap election.

Analysts said the Social Democrats, with 10 seats, were likely to get a share of the power again in coalition with Jankovic's party, List of Zoran Jankovic - Positive Slovenia.

Jankovic was also likely to look to the centrist Civil List of Gregor Virant, the pensioners party Desus and possibly the centre-right Slovenian People's Party.

I can cooperate with anyone but Janez Jansa, Jankovic told Pop TV. Jansa's party took 26 seats, with over 99 percent of votes counted.

Tomorrow is a new day, he said. We do not talk about coalitions today.

Such a broad coalition could hinder the government's ability to adopt the painful economic reforms analysts say are needed.

These will include an increase in the retirement age for Slovenians, which is among the lowest in the EU at 57 for women and 58 for men.

Jankovic says he plans to boost budget revenues by raising value added tax by 1 percentage point to 21 percent, a move opposed by two of his potential coalition partners.

Pensioners party Desus is against raising the retirement age to 65. There could also be tough bargaining over Jankovic's opposition to privatisation.

Slovenia has been standing still since September while the rest of the world continued to turn, outgoing premier Pahor told reporters after the results were announced.

We need the fast formation of a strong government that will implement reforms, he said.

(Editing by Matt Robinson)