* Kosovo to upgrade civil response force
* Move follows thaw in relations with Serbia
* NATO still the major military force in Kosovo
By Fatos Bytyci
PRISTINA, March 4 (Reuters) - Kosovo's government ordered the creation of a national army on Tuesday by upgrading a lightly armed civil response force six years after the majority-Albanian country seceded from Serbia.
The army will comprise 5,000 active soldiers and 3,000 reservists for a landlocked country of 1.7 million people bordering Serbia, Albania, Montenegro and Macedonia.
Kosovo's Western backers, which recognised it as independent in 2008, had been reluctant to see the immediate creation of an army for fear of the message it might send to Serbia and the more than 100,000 ethnic Serbs who still live in the young state.
Though Serbia does not recognise Kosovo as sovereign, relations between the two have improved over the past year with the agreement of a landmark accord brokered by the European Union.
Serbia has agreed to cede its de facto control over a northern pocket of Kosovo, in return for guaranteed rights for ethnic Serbs living there and the start of EU membership talks for Belgrade.
Kosovo Prime Minister Hashim Thaci, addressing a meeting of his cabinet, said the move would benefit all Kosovars "regardless of their ethnic, religious or political orientation". Parliament is expected to endorse the decision later this month.
Thaci's Serbian counterpart, Ivica Dacic, however, said it was "not in accordance" with the Brussels accord.
Speaking to reporters at a business conference in the Serbian ski resort of Kopaonik, he said Belgrade had already asked NATO for a guarantee that no Kosovo army would be allowed to enter the mainly Serb north without permission from the Western alliance.
NATO has not commented publicly on the request.
Any new army would have to work alongside a NATO peace force in Kosovo that currently numbers 5,000 soldiers. NATO has been trying to cut back its presence even further but has been thwarted by tensions in the north.
Kosovo already has the nucleus of a future army in the Kosovo Security Force (KSF), a lightly armed, 2,500-strong force tasked with crisis response, civil protection and ordnance disposal.
The new army would be composed of land forces, a national guard, logistics and training commands. It would have a budget of 65 million euros ($89.53 million) per year. There were no immediate details on the type of hardware and weaponry it might use.
Asked about the move, a NATO official, speaking on condition of anonymity, told Reuters in a written response: "The future of the KSF is an internal matter for local Kosovo institutions."
NATO arrived in Kosovo in June 1999 on the back of 78 days of air strikes to halt the killing and expulsion of ethnic Albanian civilians by Serbian forces fighting a two-year counter-insurgency war.
Kosovo became a ward of the United Nations before declaring independence in 2008. It has been recognised by more than 100 countries, but has been unable to join the United Nations due to the opposition of Serbian ally and U.N. veto-holder Russia. ($1 = 0.7260 euros) (Additional reporting by Ivana Sekularac in KOPAONIK, Serbia; Editing by Matt Robinson)