BUCHAREST Exit polls showed Romanian Prime Minister Victor Ponta's alliance won a clear victory in a Sunday election, putting him in a strong position in a power struggle with the rightist president.
Ponta's leftist Social Liberal Union (USL) won 54-58 percent of votes according to three exit polls and is headed for a majority, but his opponent President Traian Basescu has the power to ask someone else from the USL to form a government.
That may yet unnerve markets, as any prolonged period without a new administration in place would raise questions about how Romania would obtain a new International Monetary Fund deal once the current agreement expires in early 2013.
Ponta tried to impeach Basescu in July, a campaign that brought harsh criticism from the European Union and United States and has left the two men in an uncomfortable power share. The president has previously said he would never appoint Ponta again, though his language has softened in the last two weeks.
"Starting tomorrow, we can talk projects for the next four years ... because we have peace and stability," Ponta, a 40-year-old lawyer, told reporters in his Targu Jiu constituency, a few hours from Bucharest.
The former communist country has made progress in some areas since the 1989 revolution that overthrew dictator Nicolae Ceausescu, but although it joined the European Union in 2007 it remains the bloc's second poorest member.
Heavy snow, rain and fog across the Balkan country hampered turnout, which was only 37 percent by early evening, but also reflected deep dissatisfaction with politicians - many of whom voters view as corrupt - among an electorate of just over 18 million. First official results are due early on Monday.
Romania lags regional peers Poland, Hungary and the Czech Republic and struggles to supply running water and reliable electricity to some of its 19 million people. Long-term reforms such as privatization of inefficient state companies and an overhaul of health care have failed to materialize, and the economy is struggling to recover from a deep recession.
The exit polls put opposition Right Romania Alliance (ARD), allies of Basescu and unpopular for pushing austerity, on 19 percent and populist Dan Diaconescu, who wants deep tax cuts, in third place with 10-13 percent of the vote.
The USL has benefited from disenchantment with Basescu and the ARD, who pushed through salary cuts and higher sales tax before they lost power in a parliamentary confidence vote in April. But lackluster economic growth will give the next administration little room to ease cost cuts and tax rises.
"Things will remain exactly the same after this election, if not worse," said pensioner Mufide Suliman in a cold and rainy Bucharest. "I don't hold any hope for us. Maybe my grandchildren will have a better life."
Romania's complicated electoral system - combining constituencies and proportional representation - favors large parties and analysts say the USL would probably thus win even more seats than its proportion of the vote.
Ponta said he would discuss working with the ethnic Hungarian UDMR party, which exit polls put in fourth place with about 5 percent of votes. Two-thirds of seats are needed to change the constitution, along with backing in a referendum.
By late afternoon, the Interior Ministry had recorded 370 instances of alleged fraud in the election, which is being monitored by the Organisation for Security and Cooperation in Europe (OSCE).
"I gave a chance to the team which is now ruling (USL)," said former textile worker Doina Isopescu at a polling station in Bucharest. "I'm fed up with cuts, cuts and again cuts."
The leu fell to a record low against the euro in August during Ponta's attempt to remove the conservative Basescu from office, using tactics which the EU and United States said undermined the rule of law. The currency remains near lows and borrowing costs edged higher in the weeks before the election.
The focus will now be on Basescu's comments for an indication of whom he might nominate, which he will do after full results - should be due on Wednesday - and talks with parties.
(Additional reporting by Luiza Ilie; Editing by Stephen Powell)