Hungary centre-right set for historic election win

BUDAPEST (Reuters) - Hungary's centre-right Fidesz party looked poised to win a two-thirds parliamentary majority in Sunday's second-round election, giving it the power to enact deep reforms and kickstart the recession-hit economy.

Having secured an outright majority in the 386-seat parliament by defeating the ruling Socialists in the first round on April 11, Fidesz now has a chance to win another 52 mandates in a run-off to garner a legislative "supermajority."

That would enable Fidesz, last in power between 1998 and 2002, to implement reforms such as streamlining the bloated local government system and making dual citizenship easier to get for millions of ethnic Hungarians in neighbouring countries.

The last time any government secured a two-thirds mandate was in 1994 when the Socialists teamed up with the liberal Free Democrats.

The other parties with seats in the next Hungarian parliament already are the Socialists with 28, far-right Jobbik with 26 seats, and green LMP which has five seats.

Fidesz, running on a joint ticket with the small Christian Democrats, won 206 seats in the first round and now stands a chance of forming the first non-coalition government with a two-thirds mandate in Hungary's 20-year post-communist history.

"We now have the opportunity to create an unparalleled unity and, with it, initiate changes unprecedented in both their scale and swiftness," Viktor Orban, set to be Hungary's next prime minister, told the newspaper Magyar Nemzet on Friday.

"The entire country feels that it can now make history and this sentiment is a tremendous driving force."

Since Fidesz won the first round of elections two weeks ago, Hungarian government bond yields have fallen by about 30 basis points and the forint has outperformed its regional peers, boosted by the prospect of a strong government.

A survey by think tank Nezopont Intezet this week showed 72 percent of respondents were happy about the outcome of the first round of elections and 57 percent said a two-thirds majority for Fidesz would benefit the country.

But with the economy just emerging from downturn and unemployment running at a 16-year high, expectations for swift and tangible change will be immense, leaving Fidesz little time to celebrate.

Investors holding billions of euros in government bonds will also expect a clear road map on how Hungary plans to put its public debt -- the highest in central Europe at around 80 percent of GDP -- on a firm downward path at a time when worries over Greece are keeping markets on edge.

Fidesz has pledged more jobs, less bureaucracy and lower taxes to revive the economy but with a history of high deficits and the budget under the microscope of international lenders, the room for fiscal stimulus will be limited.

"There is no room for unfounded tax cuts. It would just increase risk of a sell-off in the forint," said analyst Lars Christensen at Danske Bank. "However, tax cuts combined with labour market and pension reforms would be very positive."

(Editing by Louise Ireland)