WARSAW Poland's centrist presidential candidate Bronislaw Komorowski faces a tight run-off vote against his right-wing rival Jaroslaw Kaczynski on July 4 after beating him by only a few percentage points in a Sunday vote.
Financial markets would prefer a Komorowski victory, expecting him to work smoothly with Prime Minister Donald Tusk's economically liberal government to tackle a big budget deficit and prepare the country eventually to adopt the euro.
But first-round results gave the mild-mannered candidate of Poland's ruling pro-business Civic Platform (PO) a narrower margin of victory than many pre-election polls had suggested and he faces a stiff challenge to beat opposition leader Kaczynski.
Komorowski's lead "could very well melt away in the next two weeks if Komorowski chooses complacency," said Pawel Swieboda, head of the DemosEuropa think-tank.
Results from 94 percent of polling stations showed Komorowski won 41 percent of the vote against 37 percent for Kaczynski, a combative nationalist who is vying to replace his twin brother Lech Kaczynski, whose death in a plane crash in Russia in April triggered the election.
While the prime minister holds most of the power in Poland, the president can veto laws, appoint key officials, and has a say in foreign and security policy.
Komorowski, speaker of parliament and acting president, shares Tusk's vision of a Poland firmly anchored in the European mainstream, working closely with Germany and other EU partners and trying to improve long-troubled ties with Russia.
Kaczynski is opposed to joining the euro any time soon and is distrustful of the EU, Russia and Germany. He has also urged stimulus packages to counter the economic slowdown but Tusk has followed more cautious policies.
Polish bond yields rose on Monday partly in response to Komorowski's relatively narrow lead in the first round.
A Kaczynski win would bring uncertainty and the risk that he would continue his brother's habit of vetoing government bills.
Poland's relations with Berlin, Moscow and Brussels nosedived during Jaroslaw Kaczynski's stint as prime minister in 2006-07, when Lech as president reinforced Warsaw's image in the European arena as a difficult country to work with.
Kaczynski softened his prickly image after the death of his brother and called for cooperation across the political spectrum, but on Sunday evening he told his supporters Poland faced a stark choice in the runoff vote.
"This should be a round in which a choice will be made between two visions of politics, two visions of Poland, because there are differences," he said. We see the country's future differently, we see differently the path to its success."
The biggest prize for both candidates will be the support of the leftist electorate after Sunday's surprisingly strong showing by Grzegorz Napieralski, the candidate of the former communist SLD party, who won the backing of 14 percent of Poles.
Napieralski declined to endorse either frontrunner on Monday. Analysts expect many left-leaning voters to back Komorowski, a more moderate conservative, due to their dislike of Kaczynski's nationalism and euroscepticism.
However, Kaczynski tilts to the left on economic policy, opposing privatisations and backing more state spending, and his campaign manager reached out to the Napieralski camp on Monday.
"In terms of social policy, we have lots to offer (the left) and we are very credible," Joanna Kluzik-Rostkowska told reporters, noting that Kaczynski had increased the minimum wage for workers when he was prime minister.
Kaczynski backs Napieralski's proposal for a round table discussion of public health care, she added.
A Komorowski win next month would entrench the dominance of Polish politics by Tusk and PO but analysts have played down the chances of them pursuing radical economic reforms before a 2011 parliamentary election, for fear of scaring away voters.
(Editing by Mark Trevelyan)