* Centre-right parties win strong majority
* New Public Affairs party will be kingmaker
* Leftist Soc Dems win most votes but appear to concede
(Updates with quotes, left-wing leader resigning)
By Robert Mueller and Jana Mlcochova
PRAGUE, May 29 (Reuters) - Centre-right Czech parties
advocating austerity to prevent a Greek-style debt crisis beat
pro-welfare leftists in an election on Saturday and looked set
to form a government able to push through deep economic reforms.
The result is likely to end a year of uncertainty in which a
caretaker cabinet has tried to steer the country through
economic crisis after a centre-right government collapsed in the
middle of Prague's tenure of the rotating EU presidency.
While coalition talks including a new, untested centrist
party may be tough, the outcome virtually eliminated chances of
a stalemate.
Investors are keen for a strong government to nurture the
European Union and NATO member through a nascent recovery after
its economy contracted by 4.1 percent last year.
Civic Democrat election leader Petr Necas, who had said the
leftists would lead the Czechs to national bankruptcy, said he
would aim for "a government of budget responsibility" and his
party should name the prime minister of any coalition.
"It's good news for the Czech Republic that responsibility
won over populism, and that the Czech left was not allowed to
take power," he said. "It is great news that will allow the
Czech Republic to avoid a repeat of the Greek scenario."
WARNINGS OVERBLOWN
With Czech public debt hovering at only 35 percent of annual
economic output -- half the EU's average -- economists say
invoking Greece or warning of bankruptcy may be overblown.
But they agree that reforms of the pension and health
systems are needed. They say a right-leaning cabinet is the best
option for the economy and would help lift the crown currency,
which fell by 0.8 percent against the euro on Friday on fears
that an inconclusive vote would produce a weak government.
The Civic Democrats have proposed private retirement
accounts to prevent deepening deficits in the pension system;
cutting the public deficit to the EU-prescribed level of 3
percent of GDP by 2012, from 5.9 percent last year; trimming
social benefits; and reforming welfare and health care.
"They seem pretty committed to trying to bring the deficit
down," said Barclays economist Daniel Hewitt.
"I think this will be crown-positive."
The leftist Social Democrats won the most votes of any
party, garnering 22.1 percent. But centre-right parties together
secured a strong parliamentary majority, led by the Civic
Democrats on 20.2 percent, according to official results with 99
percent counted.
Their potential allies, the conservative party TOP09, had
16.7 percent, and the centrist Public Affairs 10.9 percent.
Public Affairs is a new party that agrees with the rightist
groupings' fiscal stance, but one that analysts say could be
unpredictable in coalition talks.
Public Affairs leader Radek John, a popular former TV host,
said he would support the centre-right on fiscal reforms.
But his party has almost no record in policymaking, a small
membership and a reputation for a populist streak that could
make it a volatile partner.
Necas emerged as the Civic Democrat leader after his
predecessor, former prime minister Mirek Topolanek, stepped down
this year. A bespectacled trained physicist, Necas is seen by
many Czechs as a thrifty everyman who has managed to distance
himself from the scandals that have plagued his party.
LEFTIST LOSS
President Vaclav Klaus is expected to pick a leader to start
coalition talks in the coming days after results are verified.
If the three centre-right parties join forces, they will
have the largest ever majority for a Czech government -- up to
120 of the 200 seats in parliament -- and could end years of
policy gridlock that has caused Prague to lag its ex-communist
peers in pension, healthcare, and welfare reforms.
Social Democrat leader Jiri Paroubek, a leftist reviled by
conservatives for an aggressive style but favoured by many
Czechs for his pledges to raise taxes on companies and the rich
to expand social benefits, conceded defeat and quit as leader.
"People have chosen the direction the republic should go in,
and it is a different direction than the one the Social
Democrats were offering," he said. "It must be clear to everyone
that this country is on track for a right-wing coalition."
The result also quashed the fears of many Czechs that the
Social Democrats could take power with backing from the
Communists, who had 11.3 percent.
The Communists have not shared power since their
totalitarian rule ended in the 1989 Velvet Revolution.
