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WARSAW (Reuters) - Poland's eurosceptic Law and Justice party (PiS) crushed the pro-EU ruling party in Sunday's parliamentary election, but it will have to wait for the final vote tallies to discover whether it can rule alone or will need a formal coalition partner.
Detailed exit polls showed three smaller parties, including the leftwing alliance that grew out of the pre-1989 Communist Party, teetering on the edge of the threshold for entering parliament.
That might make for some political horse-trading over the next few weeks but will not weaken the decisive swing towards Law and Justice's brand of social conservatism mixed with left-leaning economics. Preliminary voting results are due on Monday evening and final numbers on Tuesday. The latest exit poll saw PiS winning just over half of the 460 parliamentary seats.
With this result, Jaroslaw Kaczynski's PiS has scored the biggest victory for a single party in terms of seats since Poland shed communism in 1989, returning to power in ex-communist central Europe's biggest nation after eight years.
The European Commission and Germany - which both had strained ties with the last PiS-led government that fell apart in 2007 - said they hoped for good relations with the new government, which will be led not by the combative Kaczynski but by his ally Beata Szydlo, who has no foreign policy experience.
PiS favors a sharp rise in public spending and also wants to get the central bank to pump 350 billion zlotys into the economy over six years to support growth - a move some see as undermining the bank's independence.
PiS signaled plans to reap new revenues from next year with a tax on banks' assets and there were also signs it was confident of sufficient informal support in parliament from other parties to plan changes to Poland's constitution.
"Many party leaders have talked of wanting deeper change in Poland so, if we want to deliver that, changes to the constitution are vital," the party's spokesman on economic affairs, Zbigniew Kuzmiuk, told a radio broadcast.
Rating agency Standard and Poor's said the outcome of the vote had no immediate impact on Poland's A- rating with a positive outlook, but added that policy measures planned by Law and Justice could dampen investor confidence.
"We could revise the outlook to stable if we saw reversals regarding fiscal consolidation, macroeconomic management, or monetary policy," said S&P lead analyst on Poland, Felix Winnekens.
Poland's main stock market index .WIG20 rose 0.5 percent on Monday, but shares in some banks fell. The zloty currency EURPLN= was only marginally weaker as investors had already priced in a PiS victory in recent weeks. Bonds were stable.
Poland's economy expanded by some 50 percent in the last decade, with the outgoing pro-market Civic Platform (PO) focusing on making the most of generous EU aid and combining green-field investment with fiscal prudence.
But some of PO's policies, including a shift of some pension assets to the state, annoyed some of its core urban, middle class voters who on Sunday switched to a new, economically liberal party Nowoczesna (Modern).
Despite Poland's strong economic growth, pockets of poverty and economic stagnation remain, and PiS was able to exploit growing frustration in these areas that the fruits of economic success had not been more evenly shared.
PO's move to raise the retirement age to 67 also cost the party votes and played into the hands of PiS, which has promised to bring it back down, to 65 for men and 60 for women.
PiS, distrustful of the EU and an advocate of a strong NATO stance in dealings with Russia, opposes joining the euro zone any time soon and promises more welfare spending on the poor.
It also wants to enshrine more Catholic values in law, reflecting the party's socially conservative stance. Those ideas are broadly supported by the other big winner in Sunday's polls, an anti-establishment group led by rock star Pawel Kukiz.
"If it turned out that we are a few seats short (of a majority), I would prefer a stable cooperation, and the first natural partner is Mr.Kukiz," said Jaroslaw Gowin, seen as a potential candidate for defense minister in the new government.
The latest exit poll update from the IPSOS pollster gave PiS 37.7 percent of the vote, translating to 232 seats in the 460-member lower house of parliament. Kukiz was on course to secure around 40 seats.
The final numbers could change if a handful of smaller parties exceed vote thresholds for winning seats.
Kukiz told Radio Zet he did not plan to enter a coalition, but Polish political commentators assume PiS will be able to count on at least some of his lawmakers in the parliament. PiS may also hope to win over some Civic Platform lawmakers.
PiS has vowed to take on a more assertive stance in foreign policy, which is all but certain to cause fresh rifts between Warsaw and Berlin as well as Brussels after eight years of PO rule, which sought to keep Poland in the European mainstream.
Asked to comment on the election result, German government spokesman Steffen Seibert told a news briefing: "Germany and Poland, our two peoples, have become closer partners and friends - not just on the level of political cooperation, but above all in the relationships between the peoples ... and we want that to remain the case."
European Commission president Jean-Claude Juncker has written to Szydlo, Poland's likely new prime minister, saying he expects Warsaw to "play a central role" in building a "strong and resilient European Union", a spokesman said on Monday.
Russia responded cautiously to the Polish election result, noting that bilateral relations are not in very good shape.
"We want them (better relations) now as well, but as we say, you cannot force love," Kremlin spokesman Dmitry Peskov said.
Additional reporting by Marcin Goettig, Wiktor Szary, Pawel Sobczak in Warsaw, Lidia Kelly in Moscow, Writing by Patrick Graham and Gabriela Baczynska, Editing by Gareth Jones