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BELGRADE, July 16 (Reuters) - Croatia will hold a snap election on Sept. 11, President Kolinda Grabar-Kitarovic said in a statement on Saturday, following the fall of the government after a vote of no-confidence last month.

Prime Minister Tihomir Oreskovic's five month old centre-right coalition government collapsed as a result of a split between the conservative HDZ party and its junior reformist partner, Most ("Bridge").

According to recent opinion polls, the HDZ is trailing the main opposition party, the Social Democrats (SDP), by 10 percentage points, although none of the biggest parties is likely to win an outright majority and a hung parliament is a distinct possibility.

The conservatives will elect their new leader on July 17, with a member of the European Parliament Andrej Plenkovic the only candidate so far.

"The fact that the HDZ will have a new leader is likely to reflect positively on the party's standing and may even boost its coalition potential. However, we may again face a situation where it won't be easy to form a stable cabinet," said political analyst Ivan Rimac.

The 'Most' alliance, or perhaps another small party, could again hold the balance of power.

The European Union's newest member has one of the weakest economies in the bloc and is in dire need of a stable government capable of pursuing reforms in order to boost investment and reduce high public debt of 86 percent of gross domestic product.

Without it, it will be impossible for Croatia to achieve the sustainable higher growth levels of at least three percent that are needed to turn around high unemployment of around 15 percent and to service financial obligations at a favorable price.

At the moment, Croatia needs some 3.5 percent of its gross domestic product annually just to service interest payments.

(Reporting by Ivana Sekularac; editing by David Clarke and Elaine Hardcastle)