By Marius Zaharia and Michael Winfrey
BUCHAREST (Reuters) - Romanian President Traian Basescu narrowly won re-election, final results showed on Monday, but the leftist opposition said it had proof of fraud and would contest the official tally.
Basescu won 50.3 percent versus 49.7 for Social Democrat leader Mircea Geoana, a razor-thin margin likely to deepen a political schism in the EU newcomer that has paralysed reforms and delayed a 20 billion euro (18.13 billion pounds), IMF-led aid deal.
Geoana, who claimed victory as soon as Sunday's voting ended, did not concede defeat, although his designated candidate for prime minister, Klaus Johannis, appeared to accept the outcome, telling a news conference: "My road ends here."
The ex-communist Social Democrats said initial exit polls showing Geoana had won, a large number of annulled ballots and evidence of multiple voting would "obviously force us to contest the result."
"We have proof of fraud," party Vice-President Liviu Dragnea told a news conference. Police reported 194 irregularities.
OSCE election observers said the second round of voting met commitments to the pan-European watchdog but urged authorities to investigate reports of irregularities.
The vote was one of the most important for the Balkan state since Stalinist dictator Nicolae Ceausescu was toppled and shot 20 years ago. The victor must name a new government that can restart talks on a stalled International Monetary Fund rescue.
The outcome sent the leu currency slightly lower, and analysts said it illustrated the polarizing debate over reforms to boost the economy and wipe out graft in a country ranked the European Union's second poorest and most corrupt.
Basescu thanked his supporters in a brief appearance on Monday and said he would make an official statement after the central election bureau validates the results on Tuesday.
GOVT STRUGGLE
"The conduct of the second round confirms our initial assessment that this election was held generally in line with OSCE commitments," said Vadim Zhdanovic, head of the Organisation for Security and Cooperation in Europe mission.
"But reports of irregularities should be investigated without delay," he added.
Election officials said they had not received any official complaints contesting the vote. Full results are expected to be validated later this week by the Constitutional Court.
Analysts said the abrasive Basescu may struggle to form a government with other major parties with which he repeatedly clashed over anti-corruption measures during his five-year term.
Basescu, who had trailed Geoana by eight percentage points in the last two opinion polls, owed his victory to winning more than three-quarters of 148,000 ballots cast by Romanians living abroad, who had backed him heavily in a November 22 first round.
At home, ordinary Romanians braced for more turmoil.
"I voted for Basescu, but I think he will continue to fight with other parties," said Daniel Burst, a 42-year-old guard.
Last month, the IMF suspended a review of the aid deal after opposition parties toppled a Basescu-allied cabinet that has stayed in place as an interim administration.
The Fund has said it will withhold a 1.5 billion euro aid tranche due this month until a new cabinet and a cost-cutting budget are in place, raising market worry about state finances.
The economy is expected to contract by 8 percent this year.
The Romanian leu was down 0.3 percent from Friday, lagging the Hungarian forint and the Polish zloty.
The folksy 58-year-old former Bucharest mayor has endorsed IMF recommendations to freeze state wages, reduce some pensions, and cut as many as 150,000 jobs in the sprawling public sector, which analysts say hinders Romania's long term growth prospects.
But mustering support for a cabinet could be a stretch for Basescu and take time.
"It isn't surprising given how close the result is, but it will just prolong the instability," said Joanna Gorska, deputy head of Eurasia Desk for Exclusive Analysis. "It will make it harder to push through necessary reforms and it is another stumbling block to getting the IMF deal back on track."
