Hungary markets rally, far right needles Fidesz

BUDAPEST (Reuters) - Hungary's Fidesz pledged on Monday to create jobs after its sweeping election victory while the far-right Jobbik flexed its newly won electoral muscle by promising to pursue distinct and spectacular politics.

The leader of Jobbik, which bagged one in every six votes to win nearly as many seats as the punished ruling Socialists in Sunday's swing to the right, said it would not be invisible in parliament and vowed to eradicate what it branded Gypsy crime.

The expectation on Fidesz to act quickly to put Hungary on the path to sustainable growth after near financial collapse will be huge, and investors are wary about whether Jobbik will try to hamper reforms and stir more discontent over the economy.

"The strong showing for Jobbik and the weak results for the traditional liberal parties might concern investors, but they are also likely to take some comfort in the fact that the conservative Fidesz won an outright majority," Danske Bank said.

Fidesz won 206 of the 386 parliamentary seats on Sunday and has a good chance of reaching the two-thirds threshold in the second round on April 25, which would put it in a position to pass the reforms and even modify a constitution defined 20 years ago after the collapse of communism.

Viktor Orban, Hungary's next prime minister, has disclosed only sketchy policy plans but Fidesz has signalled it wants tax cuts and to reduce the budget deficit, even though it also said a higher deficit than the target of 3.8 percent could be safely financed.

FISCAL DETAIL

Moody's rating agency said Fidesz must continue fiscal consolidation after the Socialists' budget cuts and said it was reasonable to maintain its negative outlook on Hungary.

The Socialists reined in the deficit under a rescue deal led by the International Monetary Fund. The country's economy contracted by 6.3 percent last year, while unemployment is running at 11.4 percent -- the highest since 1994.

"It will be key to see how the Fidesz government addresses fiscal issues and there remain some things to be detailed from Fidesz," Moody's Senior Analyst Dietmar Hornung told Reuters in an interview.

Orban told supporters they had "defeated hopelessness" when he declared victory. He will hold a news conference at 12:30 a.m. British time.

The forint strengthened by 0.6 percent versus the euro to 264.98 by 10:17 a.m. British time, outperforming regional currencies. Government bond yields dropped by over 20 basis points as the impact of good news about the Greek debt crisis were amplified by the prospect of a strong Hungarian government, traders said.

Hungary's main share index firmed to a 27-month high before retreating to trade firmer by 0.86 percent from Friday.

Jobbik Chairman Gabor Vona told M1 television his party would "conduct very distinct and very spectacular politics."

"We are not preparing to conduct peaceful and almost invisible politics with this 17 percent (result)," he said.

Leveraging discontent over the economic crisis and Hungary's large Roma minority, Jobbik secured 26 seats, against the 28 seats won by the Socialists, while the green liberal LMP got five seats. The remaining 121 seats will be decided on April 25.

Vona said told M1 his party would work on a "solution to the problems around Gypsy-Hungarian coexistence. That means eradicating Gypsy crime."

The Roma make up between 5 and 7 percent of the population and vilifying them proved Jobbik's most successful tactic as the slump put more than one in 10 Hungarians out of work.

(Reporting by Krisztina Than, Sandor Peto and Marton Dunai; Editing by Alison Williams)