Romanian election close as rivals claim victory

BUCHAREST (Reuters) - The result of Romania's presidential election was on a knife-edge on Monday with both candidates claiming victory.

The first official results were due at 0600 GMT on Monday and analysts said a drawn-out dispute could hit markets already shaken by political and economic crises in the European Union newcomer.

Most exit polls showed leftist challenger Mircea Geoana ahead by a slim margin, but a centre-right party allied to President Traian Basescu said an unofficial parallel count by its volunteers showed he would win by a whisker.

Adriean Videanu, a senior member of the Basescu-linked Democrat Liberal party, said with more than 99 percent of ballots counted, Basescu had 50.14 percent of the vote.

He added foreign polling stations serving Romanians abroad, who went heavily for Basescu in a November 22 first round that he won, would further tip the election in favour of the folksy former sea captain.

"You can trust what I'm telling you now: We won," said Basescu after polling stations closed.

The Social Democrats, which Geoana heads, said in its parallel tally with 62 percent counted, their candidate had 50.8 percent.

The vote is one of the most important for the Balkan state since it executed Stalinist dictator Nicolae Ceausescu 20 years ago, as the victor must name a new government that can restart talks over a stalled 20-billion-euro rescue loan deal.

The International Monetary Fund suspended review of the deal last month after opposition parties toppled a Basescu-allied minority cabinet and has said it will resume talks only once a new government and a cost-cutting budget are in place.

Analysts said a dispute over the result could delay both, extending woes for the country of 22 million people, which despite an economic boom earlier this decade is still the EU's second poorest state after Bulgaria.

"It's the worst case scenario," said economist Daniel Hewitt of Barclays Capital. "A delay in forming a government and working on the 2010 budget would be very, very tough on Romania financially."

COMEBACK?

Three exit polls put Geoana ahead with between 50.7 and 51.2 percent. A fourth put Basescu in front by 50.4 to 49.6.

Victory would be a surprise comeback for Basescu, who trailed Geoana by eight percentage points in the last two opinion polls before the vote after Geoana forged a pact with the third largest Liberal party to rule together if he wins.

Geoana, a 51-year-old former ambassador to Washington, has blamed the president's aggressive style for a climate of animosity that has downed two cabinets in the last five years.

Riding on a pledge of stability and less pain for Romanians hit by an expected 8 percent economic contraction this year, he has also indicated he may resist harsh belt tightening reforms that the IMF says are key to recovery.

Analysts say he would more easily create a new government, controlling almost two-thirds of parliament with the Liberals. He has pledged to name a government by Christmas, with ethnic-German provincial mayor Klaus Johannis at the helm.

"My first priority will be to install a government," Geoana said late on Sunday.

"Immediately after we see final results, Johannis will come to Bucharest and start working on a 2010 budget draft."

Markets have expressed concern that an ex-communist Social Democrat government will go soft on economic reforms and anti-graft measures after his party blocked some corruption inquiries backed by Basescu into senior party members. Romania is ranked the most corrupt country in the European Union, along with Bulgaria and Greece.

Basescu is seen as more aggressive on reforms and has promised to embrace painful belt-tightening -- including up to 150,000 public job cuts -- moves Geoana opposes.

But because of his history of clashes with other parties, they say it may be more difficult to build a government and find traction for austerity measures needed to jump start the IMF-led aid deal, particularly if he continues his push against graft.

"I will partner with both those who voted for me and those that voted against me to oblige the political class to reform," Basescu said.

(Writing by Michael Winfrey; Editing by Janet Lawrence)