By Gergely Szakacs and Krisztina Than
BUDAPEST (Reuters) - Hungary's centre-right Fidesz party won a two-thirds parliamentary majority in Sunday's election, giving the new government the power to enact reforms and boost the recession-hit economy.
With nearly all the votes counted, Fidesz, led by charismatic Viktor Orban, had won 263 seats, above the 258 needed for the two-thirds majority, ousting the Socialists after eight years in power.
Fidesz was last in power between 1998 and 2002, and its big election win on Sunday means Orban can form the first non-coalition government with a two-thirds mandate in Hungary's 20-year post-communist history.
The mandate will enable Fidesz to implement reforms such as streamlining local government, changing the electoral law and even the constitution. It will also be able to make dual citizenship easier to get for millions of ethnic Hungarians in neighbouring countries.
Analysts said the unprecedented mandate would be positive for the currency and local markets but investors would want to see Fidesz put forward with clear economic plans fairly quickly.
Fidesz has pledged to create jobs, lower taxes, and cut bureaucracy to revive the economy.
"Tax reform, and local government reform, plus overhauling state administration -- these will have to be the key issues," said Gyorgy Barcza, an economist at K&H Bank.
Fidesz, which has said it wanted a new deal with international lenders -- the IMF and the EU -- will have to come to agreement with lenders and it will likely want to negotiate a higher budget deficit target for this year.
The current target is 3.8 percent of gross domestic product, after the Socialists cut the deficit last year.
But its fiscal room of manoeuvre will be limited.
"The IMF will likely be to some extent lenient if they receive a pledge for structural reforms, for serious changes in 2011-2012," Barcza said.
A failure to reform quickly and speed up growth would erode the confidence in the new government and the economy, analysts said.
SUPPORTERS JUBILANT
Around 4,000 cheering supporters were celebrating Fidesz's victory in the centre of Budapest.
"Corruption needs to be eradicated, those responsible need to be held accountable. Public safety needs to be restored. And the economy, especially small businesses, needs to be put back on track," said Gabor Siklosi, 44.
"I have watched Orban for 20 years now. I am convinced he will not abuse his powers."
"Public safety, holding corrupt leaders accountable, and most of all, jobs. That's what most Hungarians want," said Janos Fristaczki, 60, a bus driver.
The Socialists are set to win 59 seats, while far-right Jobbik will have 47 seats in the next parliament, based on the preliminary results.
Fidesz had won an outright majority in the first round on April 11 by winning 206 seats in the 386-seat parliament.
Analysts said if Fidesz pursued responsible fiscal policy and enacted reforms in the healthcare system, education and the labour market, that could boost Hungary's economic growth in the medium term and improve the economy's competitiveness.
"This would also mean that in exchange for relaxing fiscal conditionality under a new IMF-led programme, the new government would be able to introduce structural reforms of the public sector and other major legal changes that would lead to substantial fiscal savings in the medium and long term," Goldman Sachs said in a note on Sunday.
Since the first round, 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.
(Editing by Alison Williams)
