Danish PM wins third term

COPENHAGEN (Reuters) - Danish Prime Minister Anders Fogh Rasmussen led his centre-right coalition to a third term in power in parliamentary elections on Tuesday, promising voters he would lower taxes and maintain a tough stance on asylum-seekers.

Rasmussen, 54, fought a close race with Social Democrat leader Helle Thorning-Schmidt, 40, who argued in her campaign that Danes would have to sacrifice better welfare for tax cuts.

"It's historic that for the third election in a row the Liberals are Denmark's biggest party," Rasmussen told supporters after the election.

He told Reuters later that he would live up to all his campaign promises, despite his reduced majority.

"We presented five comprehensive reforms when elections were called," he said. "It is my intention to pass them in the Danish parliament."

Rasmussen's Liberal-Conservative coalition and its far-right ally, the Danish People's Party (DPP), took a total of 90 seats in the 179-seat parliament.

While the bloc's outright majority was in question earlier in the vote count, it was assured after a supporting party won one of two seats in Danish territory the Faroe Islands.

The bloc held 94 seats before Tuesday's vote.

The outcome may have been tight but spirits were high at the Liberal Party's election night venue in central Copenhagen.

"I have never felt this good before. It's fantastic for Denmark and now we're going to party," said Berit Nielsen 18.

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Rasmussen unseated a tired Social Democrat government in 2001 with promises to lighten the burden on the world's second most heavily taxed nation and to crack down on asylum-seekers.

The minority Liberal-Conservative coalition has held power with support in parliament from the anti-immigrant DPP.

In 2005, the prime minister won a new term with similar pledges and a commitment to support Denmark's extensive welfare state. Rasmussen was at the centre of a crisis last year when he refused to apologize for cartoons depicting the Prophet Mohammad published in a Danish newspaper.

The veteran politician called Tuesday's election 15 months earlier than required in what analysts said was a bid to capitalize on a strong economy and 33-year low unemployment ahead of thorny public sector wage talks.

Rasmussen has been in a neck-and-neck race with Thorning-Schmidt for most of the campaign, before opinion polls on Tuesday showed the pendulum swinging back his way.

Surveys showed Danish voters going into the election were more concerned with the health of the welfare system than with immigration, the hot topic of the 2005 vote.

Voter turnout was 86.6 percent.

Rasmussen's Liberals lost six of their seats on Tuesday to take 46 mandates in parliament but kept a slim majority thanks to a strong showing by the DPP, which gained one seat.

He worked to disarm the charismatic Thorning-Schmidt, daughter-in-law of Britain's former Labour Party leader Neil Kinnock, in areas where she could have challenged him in the campaign -- withdrawing Danish ground troops from Iraq and softening his stance on asylum-seekers with children.

Thorning-Schmidt told supporters she had fought hard but it "was not enough". Her party lost two seats, ending with 45.

(Additional reporting by Gelu Sulugiuc, John Acher, Karin Jensen, Mette Fraende, Erik Matzen, Soren Bjerregaard and Martin Burlund; Editing by Stephen Weeks)