* Centre-right parties win strong majority
* Leftist SocDems win most votes but appear to concede
* Social Democrat leader says sees right-wing coalition
* New party kingmaker for centre-right coalition
(Writes through with early results, expected mandates)
By Michael Winfrey and Tomas Dolezal
PRAGUE, May 29 (Reuters) - Centre-right Czech parties that
favour budget cuts to prevent a Greek-style debt crisis defeated
pro-welfare leftists in an election on Saturday and looked set
to form a government that could push through deep economic
reforms.
The leftist Social Democrats won the most votes of any party
in the election, garnering support of 22.1 percent. But
centre-right parties secured a strong parliamentary majority,
led by the Civic Democrats on 20.2 percent, according to results
with 99 percent of the votes counted.
Their potential allies, conservative party TOP09, had 16.6
percent, and centrist Public Affairs 10.9 percent.
Social Democrat leader Jiri Paroubek, a leftist reviled by
conservatives for an aggressive style but favoured by many
Czechs for his pledges to raise taxes on companies and the rich
to raise social benefits, acknowledged defeat.
"It seems that people have chosen the direction the republic
should go in, and it is a different direction than the one the
Social Democrats were offering," he said. "It must be clear to
everyone that this country is on track for a right-wing
coalition. That is obvious."
The result quashed the fears of many Czechs that the Social
Democrats could take power with backing from the Communists, who
had 11.3 percent. The Communists have not shared power since
their totalitarian rule ended in the 1989 Velvet Revolution.
It also reduced the risk of protracted coalition talks
spooking investors who are keen for a strong government to
nurture the European Union and NATO member through a nascent
recovery after its economy contracted by 4.1 percent last year.
RIGHT RISING
Civic Democrat election leader Petr Necas, who warned
Paroubek would lead the Czechs to national bankruptcy, said he
would aim for "a government of budget responsibility" and his
party should name the prime minister of any coalition it led.
He emerged as the party's leading candidate after his
predecessor, former Prime Minister Mirek Topolanek, stepped down
following a string of public gaffes.
A bespectacled trained physicist, Necas is seen by many
Czechs as a thrifty everyman who has managed to distance himself
from the scandals that have plagued his party.
If the three centre-right parties join forces, they would
have the largest ever majority for a Czech government -- roughly
110 of the 200 seats in parliament -- and could end years of
policy gridlock that has caused Prague to lag its other
ex-communist peers in pension, healthcare, and welfare reforms.
Some analysts said it should not be taken for granted that
Public Affairs, a brand-new party with an anti-graft platform,
would join a government. But its leader Radek John said he would
prefer to support the right on fiscal reforms.
"We consider it crucial to stop indebtedness and not fall
into a Greek crisis," he said. "We probably know how to agree
much easier with Mr. Necas, and with TOP09, because I would not
trust the Social Democrats much."
MARKET POSITIVE
Many analysts have said a right-leaning cabinet is the best
option for the economy and would help lift the crown currency,
which fell by 0.8 percent against the euro on Friday on fears
that an inconclusive vote would create a weak government.
The Czech Republic has public debt equal to 35 percent of
gross domestic product (GDP), half the EU average. But an ageing
population -- retirees are expected to outnumber workers by 2050
-- will create large deficits in the pay-as-you-go pension
system.
The Civic Democrats have proposed creating private pension
accounts, cutting the public deficit to the EU prescribed level
of 3 percent of GDP by 2012 from 5.9 percent last year, trimming
social benefits, and reforming the welfare and health care
systems.
"With the centre-right taking over, the Civic Democrats will
hopefully lead a path toward fiscal prudence. They seem pretty
committed to trying to bring the deficit down," said Barclays
economist Daniel Hewitt. "I think this will be crown-positive."
