BUCHAREST (Reuters) - Romanian President Traian Basescu narrowly won re-election but his leftist challenger alleged fraud and vowed to contest the result, extending a deadlock that has imperiled an IMF-led financial rescue deal.
Basescu won 50.3 percent to 49.7 for Social Democrat leader Mircea Geoana, official results showed on Monday, a razor-thin margin that deepened a political schism in the EU newcomer that has paralyzed reforms.
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 reporters: "My road ends here."
Instead Geoana, a former foreign minister and ambassador to the United States, said the party had evidence of "massive fraud," including multiple voting and buying votes.
"The required democratic solution is to contest the outcome of election at the Constitutional Court," he told journalists. He said the party would file a complaint on Tuesday.
Election observers from the Organization for Security and Cooperation in Europe (OSCE) said the second round of voting met commitments to the pan-European watchdog but urged authorities to investigate reports of irregularities, of which police recorded 194 cases.
The vote was one of the most important for the Balkan state since Stalinist dictator Nicolae Ceausescu was overthrown and shot 20 years ago. The victor must appoint a new government that can restart talks with the International Monetary Fund and win the next tranche of a 20 billion euro ($29.76 billion) aid deal.
The leu currency fell slightly against the euro and economic analysts said it illustrated the polarizing debate over reforms to boost the economy and wipe out graft in the European Union's second poorest country and, according to Transparency International, one of its 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 validated the results on Tuesday.
IN LINE WITH COMMITMENTS
Basescu, who had trailed Geoana in opinion polls, owed his victory by about 70,000 votes to winning more than three-quarters of the 148,000 ballots cast by Romanians living abroad.
"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 OSCE mission.
"But reports of irregularities should be investigated without delay," he added.
Political analysts said the abrasive Basescu might struggle to form a government with other parties with which he repeatedly clashed over anti-corruption measures during his five-year term.
Geoana rejected cooperation with Basescu or his center-right allies, the Democrat-Liberals, and said the Social Democrats and the Liberal party, the third largest, would continue working together against the rightists under a deal forged before the election.
At home, ordinary Romanians braced for more crisis.
"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 as 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 Bucharest stock exchange lost 4.3 percent from Friday's close, although rating agency Standard & Poor's said the political situation should stabilize and allow the government to continue to comply with the IMF program.
Basescu 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.
Mustering support for a cabinet could be a stretch for the folksy 58-year-old former Bucharest mayor would 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."