* Thaci party leads reruns but share of national vote cut * Final figures may impact coalition formation
* EU warns it won't tolerate further irregularities
By Fatos Bytyci
PRISTINA, Jan 10 (Reuters) - The party of Kosovo's prime minister enjoyed big leads in two regions holding election reruns on Sunday, according to observers, but was still expected to see its overall national margin of victory go down slightly.
The now independent former Serbian province held partial electinn reruns in several areas after allegations of fraud and irregularities in the national vote last month. The outcome could impact the formation of the new coalition government.
In two out of three areas holding full reruns, Prime Minister Hashim Thaci won more than 90 percent, according to a group of non-governmental organisations monitoring the elections. But turnout was lower than indicated in the December results.
"We have lost around 20,000 votes in the national level but we don't expect this to be more than 1 percent because we are not the only losers -- other parties have also lost a lot of votes," an official from Thaci's PDK told Reuters.
Other opposition officials said Thaci's party may lose 3 to 5 percent when the rerun is added to the other December results; official numbers were unclear pending the Election Commission's announcement of the results.
Parties and independent observers said irregularities also marked Sunday's results in the impoverished country that has been independent for less than three years.
Early on Sunday the European Union warned it would not tolerate flawed elections. "We will not tolerate any fraud or irregularities in the polling today," the EU special representative in Pristina Pieter Feith said after visiting a polling centre in Glogovac. "It will do no service to the international reputation of Kosovo."
Forming a new coalition government is expected to be difficult in the Balkan country as the three next largest parties have all said they will not govern with Thaci.
Political uncertainty stemming from the early elections has already delayed the start of Kosovo's talks with Serbia, which does not recognise Pristina's independence but has agreed to discuss practicalities of coexistence such as cross-border trade and transport.
Kosovo declared independence from Serbia in 2008 but remains under international supervision. The EU has a police and justice mission and Kosovo's fragile peace is monitored by NATO troops.
Thaci's party did not appear to suffer any major setback from an explosive report issued days after the December vote by Council of Europe rapporteur Dick Marty. He alleged that Thaci, a leader of Kosovo's 1990s independence war against Serbia, had headed a mafia-style organised crime ring from that time, charges the prime minister denied. (Editing by Adam Tanner and Mark Trevelyan)
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