Turkey's ruling AKP wins vote

ANKARA (Reuters) - Turkey's ruling AK Party won a resounding election victory on Sunday, giving the pro-business, Islamist-rooted party a mandate for reform but risking fresh tensions with the secular elite.

The result is a moral triumph for Prime Minister Tayyip Erdogan who called early parliamentary polls after losing a battle with the establishment, including army generals, who did not want his ex-Islamist ally as head of state.

With nearly all votes counted, his party won 47 percent, up some 13 points on 2002, but a more united opposition means it will get around 341 out of 550 seats, slightly fewer than now.

"This is the first time in 52 years that a party in power has increased its votes for a second term," Erdogan told thousands of jubilant supporters outside his party's plush new headquarters in the capital Ankara where fireworks lit the sky.

"We will continue to work with determination to achieve our European Union goal," he said of strained efforts to join the bloc and anchor his country more firmly to the West.

Only two other, secularist, parties crossed the 10 percent threshold into parliament -- the nationalist-minded Republican People's Party (CHP) on 21 percent and the far-right National Movement Party (MHP) on 14 percent.

A score of mainly Kurdish independents also got in, the first Kurds in the assembly since the early 1990s -- prompting wild celebrating in their troubled eastern heartland.

In cities across Turkey Erdogan's fans danced, honked car horns, and waved huge flags with the party emblem, a lightbulb.

The parties had fought over economic reform, Kurdish separatist violence, efforts to join a hesitant EU and religion's place in a country of 74 million people that stretches from the EU in the west to Iran and Iraq in the east.

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Voters seem to have dismissed opposition warnings that the AK Party secretly sought an Iranian-style theocracy, despite mass rallies this year in defense of the rigid state-religion divide in Turkey, one of the Muslim world's few democracies.

"Instinctively, I feel it is too much of a majority. Fear of this religious agenda is so engrained in us, but it may just have been pumped up over the last years," said Elif Ayan, a 31-year-old film maker in Istanbul.

"I am sure they have an agenda but I don't think it is as bad as it is represented."

Erdogan, 53, has presided over an economic boom, record foreign investment, and in a sign of market cheer at his win the lira gained almost 2 percent on the dollar in early Asian trade.

Economists said Turkey's most popular politician could now press on with free-market policies and kick-start stalled EU membership talks, despite disillusionment at joining the bloc.

"This is the best-case scenario for markets ... The question now is how is the establishment going to react and this is something the markets are going to be worried about," said analyst Simon Quijano-Evans.

The army views itself as the defender of Turkey's secular state and has ousted four cabinets in 50 years, most recently an Islamist-minded predecessor of the AK Party in 1997.

"I don't think (the army) is happy but they're not going to roll the tanks out. They will explore means of making themselves felt, bearing in mind it's a government with a strong mandate," said Semih Idiz, a leading Turkish commentator.

Erdogan made conciliatory comments towards his secularist foes, quoting the revered Mustafa Kemal Ataturk who founded the republic in 1923 out of the ashes of the Ottoman empire.

The next government will quickly face challenges, such as finding a compromise candidate for president -- treading lightly to keep the army at bay -- and deciding on sending the army into northern Iraq to crush PKK Kurdish rebels based there.

That prospect increasingly worries the United States which called the poll a success for democracy, reported CNN Turk TV.

Turkish forces have battled the PKK for 23 years in a conflict that has cost more than 30,000 lives and has worsened in the last year.

(Additional reporting by Gareth Jones, Selcuk Gokoluk, Emma Ross-Thomas and Orhan Coskun in Ankara, Daren Butler and Alexandra Hudson in Istanbul and Thomas Grove in Diyarbakir)