(Adds coalition plans, quote from Thaksin)
* Military accepts Thai election result
* Size of win cuts chance opponents can stop party taking power
* It also makes military meddling less likely, analysts say
By Jason Szep and Vithoon Amorn
BANGKOK, July 4 (Reuters) - Thailand’s powerful military accepted on Monday a stunning election victory by the party of fugitive former Prime Minister Thaksin Shinawatra, adding to a new sense of stability in a country plagued by unrest since his ouster in a 2006 coup.
A day after the decisive win by Puea Thai Party headed by Thaksin’s youngest sister, Yingluck Shinawatra, the military agreed not to intervene or stop her from forming a government, according to the outgoing defence minister.
“I can assure that the military has no desire to stray out of its assigned role,” said General Prawit Wongsuwan, a former army chief close to military leaders involved in the 2006 coup that removed Thaksin.
“The army accepts the election results,” he told Reuters.
Puea Thai’s absolute majority of 264 seats in the 500-seat parliament makes it hard for Thaksin’s rivals to stop the 44-year-old businesswoman becoming Thailand’s prime minister, which would have ignited protests by her red-shirted supporters who clashed with the army last year in Bangkok.
“Winning by a big margin eases the problem of the military intervening and makes it easier for them to form a government and implement all their policies,” said Kongkiat Opaswongkarn, chief executive of Asia Plus Securities.
Yingluck, who will be Thailand’s first woman prime minister, said she would form a five-party coalition controlling 299 seats, or about 60 percent of parliament, giving her a strong hand to fulfil her election promises.
Under the Thai constitution, the first sitting of the lower House of Representatives to choose the next sucessor as prime minister must be convened 30 days after the election.
Yingluck plans to roll out a long list of Thaksin-style populist programmes that could fuel spending and inflation in Southeast Asia’s second-largest economy - from subway extensions to big wage increases and various giveaways aimed at boosting spending power, especially in rural areas.
Thai stocks jumped more than 4 percent as the scale of her victory persuaded some investors that Thailand could be more stable after the six-year crisis marked by a blockade of Bangkok’s two airports, the occupation of Government House by protesters, an assassination attempt and bloody street rallies.
Thailand’s baht currency rose 1 percent to a one-week high against the dollar on hopes foreign investors would return following $1.4 billion of outflows of global capital since the election season revved up in May.
Full Thai election coverage:
Graphic timeline of crisis: link.reuters.com/bac99r
Election preview graphic: link.reuters.com/xak89r
Thailand special report PDF: r.reuters.com/cad99r
The vote is an unexpectedly strong rebuke to the traditional establishment of generals, old-money families and royal advisers who backed Prime Minister Abhisit Vejjajiva. It suggests broad support for policies championed by Thaksin, a divisive figure elected prime minister twice, in 2001 and 2005.
Supporters say Thaksin revolutionised Thai politics with pro-business reforms and populist policies aimed at eradicating poverty. Critics accuse him of authoritarianism, crony capitalism and of undermining Thailand’s revered monarchy.
“Puea Thai’s big victory eases tensions for now but Thailand is still vulnerable,” said Kan Yuanyong, director of the Siam Intelligence Unit, a consultancy. “They will wait for Puea Thai and Thaksin to slip up, then we’ll see them strike back.”
Kan predicted anti-Thaksin yellow-shirt protesters would once again flood the streets if Yingluck seeks an amnesty clearing her brother of corruption charges and bringing him back to Thailand from self-imposed exile in Dubai.
The yellow-shirted People’s Alliance for Democracy, a motley collection of businessmen, academics and royalists, emerged in 2005 to help topple Thaksin and two pro-Thaksin governments.
Thaksin told reporters he no longer desired to be prime minister and wasn’t trying to reclaim $1.4 billion of assets seized when a Thai court convicted him of tailoring government policies to benefit his family business interests.
“Don’t worry about it. I‘m not starving,” he said of his frozen assets when asked by journalists at his villa in Dubai, where he lives to avoid a two-year jail term for graft charges he says was politically motivated.
“I want to retire,” he added. He has said he will “wait for the right moment” to come home. “Going back is not necessarily going to be going back into politics. I may turn pro in golf,” he said with a laugh.
Thaksin brushed aside concerns of an inflationary backlash from his younger sister’s campaign promises, including a roughly 40 percent rise in the minimum wage due to take effect in January. Higher inflation would be offset by growth, he said.
Yingluck dismissed criticisms over the cost of her policies such as free tablet PCs for nearly a million children.
“We know what to do. We’ll reduce costs for people and we know how to generate the income that we’ll give back to them,” she told Reuters.
Economists said the policies may force the Bank of Thailand to raise interest rates for a longer period than had been expected to control any increase in inflation.
But they said billions of extra dollars pumped into Thailand’s rural economy will stimulate consumption. Under Thaksin, money funnelled into villages through a debt moratorium for farmers and cheap loans had a knock-on effect on the whole economy, fuelling a boom in household spending.
A burst of spending could weaken Thailand’s fiscal position depending on how it is implemented, Takahira Ogawa, analyst at credit-ratings agency Standard & Poor’s Corp, told Reuters.
Under Thaksin, Thailand’s economy grew on average by 5.7 percent a year between 2002 and 2006, compared with growth of 2.2 percent in 2001 and the economic turmoil of the late 1990s. But his policies also drove up household debt and did little to fundamentally alter income gaps between rich and poor.
The stridently anti-Thaksin Nation newspaper accepted the result but pulled no punches on the challenge ahead.
“The election is over but the hatred remains,” it headlined its leader column. “It’s time for ordinary Thais to take reconciliation into their own hands.”
Yingluck’s red-shirted supporters accuse the rich, the establishment and army top brass of breaking laws with impunity -- grievances that have simmered since the 2006 coup -- and have clamoured for the return of Thaksin.
Her critics say she is a simple proxy for Thaksin, who they accused of abusing his electoral mandate to dismantle constitutional checks and balances while cementing his own authoritarian rule while in power from 2001 to 2006.
Abhisit announced on Monday his resignation as party leader.
His legacy is unclear. Backed by the army, he put down a protest movement by the red shirts sin Bangkok last year and 91 people lost their lives. Nearly 2,000 were injured. But he was also lauded by economists for steering Thailand out of the financial crisis. (Additional reporting by Panarat Thepgumpanat and Martin Petty in Bangkok and; Praveen Menon in Dubai; Editing by Michael Perry)