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* Party officials cautious
* European authorities urge painful cuts, restructuring
* Disenchanted voters stay away (Adds preliminary results)
By Igor Ilic and Ivana Sekularac
ZAGREB, Sept 11 (Reuters) - Croatia's conservative CroatianDemocratic Union (HDZ) had a clear lead in Sunday's snapparliamentary elections, preliminary results showed, suggestingthe party was on course to head a more stable government after aturbulent period for the country.
The HDZ stood at 62 seats in the 151-member parliament,according to preliminary results after 15 percent of votes hadbeen counted in the second election in less than a year, withtheir Social Democratic (SDP) rival a full 10 seats behind.
But party officials were cautious, warning that the initialresults, skewed towards rural districts that are the HDZ'straditional strongholds, may yet change.
"It is still a small number of votes counted and we shouldnot be in euphoria," Zeljko Reiner, the HDZ speaker of theparliament, told public television.
The centre-right Most ("Bridge") party which wants to endCroatia's "corrupt" 20-year-old two-party duopoly, was on 13seats. The likely kingmaker has said any partner would have topromise to implement its reformist ideas.
The previous HDZ-Most government collapsed after just fivemonths amid rows over public administration reforms andgovernment appointments.
Under its new leader, European parliamentarian AndrejPlenkovic, the HDZ, which led Croatia through its firstturbulent years of independence and war after the breakup ofYugoslavia 25 years ago, looks to have regained ground lost tothe SDP after the previous government's acrimonious fall.
Votes for three seats representing Croats abroad, whotraditionally vote for the HDZ, have yet to be counted.
Near-definitive results are due at midnight local time (2200GMT).
In a sign of an aversion to a politics that has come to bedominated by populous gestures over recent months, Croats votedin smaller numbers than last time, and lent support to populistparties, like the leftist Zivi Zid ("Human Shield") party, whichwent from one seat to seven.
"It would be good if this election yielded politicalstability," said Goran Uzelac from Zagreb just before he casthis ballot. "Unfortunately, I don't think the biggest partiesreally want major reforms."
EU URGING PAINFUL MEASURES
The new government will face a huge task in revitalising oneof the European Union's weakest economies, which is dominated bystate enterprises and where red tape deters private investment.
The EU wants its youngest member to tame high public debt,cut the budget deficit and improve the business climate to spureconomic growth.
Over the past months, politics have been dominated bypopulist rhetoric and gestures that have brought relations withneighbouring Serbia to their lowest point since the end of the1990s Balkan wars.
Three years after joining the EU, the country's record onsecuring European funds is poor, pointing to publicadministration shortcomings that contribute to macroeconomicimbalances the European Commission sees as excessive.
Parties offered few details during the campaign on how todeliver promised higher standards of living for the 4.3 millionpeople of Croatia, where unemployment stands at 13 percent.
Growth of 2.5 percent is far short of the 4 percent neededto make a dent on living standards, analysts say. Interestpayments on public debt eat up 3.5 percent of economic output.
(Writing by Thomas Escritt; Editing by Ralph Boulton and PeterCooney)
