Jan Cienski in Warsaw -

Donald Tusk, Poland's prime minister, scored a dramatic victory in Sunday's parliamentary election - returning to office for a second four-year term, the first time that has happened since the end of communist rule in 1989.

With 99% of votes counted, Tusk's Civic Platform party (PO) had 39% of the vote, while the nationalist right-wing opposition Law & Justice party (PiS) came in second with 30%. Civic Platform's previous coalition partners at the rural Polish People's Party (PSL) took about 8%. "We will have to work twice as hard in these next four years, we'll have to be twice as fast," a beaming Tusk told his cheering supporters minutes after the polls closed on Sunday evening, October 9.

If the final results don't differ much, that would give the coalition 236 seats in the 460-member lower house of parliament, enough to form a majority government.

The news was greeted with relief by financial markets, which had worried about a strong showing by PiS, led by the mercurial Jaroslaw Kaczynski, a former prime minister with a well-known distaste for both Russia and Germany who had espoused controversial ideas like a bank tax.

The Polish zloty soared by almost 2% against the dollar, and also gained against the euro and the Swiss franc, while the Warsaw Stock Exchange also showed gains. "The victory of the Civic Platform is seen as a market-friendly outcome and may improve the perception of Poland among foreign investors. Nevertheless, even the favourable outcome of the elections does not fully remove uncertainties regarding the budget outlook," said a note from Austria's Erste Bank.

Tusk's teeth

The outcome marks an enormous success for Tusk, who managed to lead Poland through the shoals of the first wave of the economic crisis, when Poland was the only EU country not to fall into recession in 2009.

Tusk has also been very cautious about undertaking the far-reaching reforms suggested by economic liberals, preferring instead to implement smaller and less controversial steps.

Jacek Rostowski, the finance minister who is so far the only minister guaranteed with retaking his portfolio, has successfully imposed a fiscal squeeze, driving the deficit down to about 5.6% of GDP this year from 7.9% in 2010. He has pledged to reduce the deficit to below 3.0% of GDP next year, a goal that may be more difficult because of the likely slowdown in western Europe. "The existing coalition of the PO and the PSL is expected to broadly meet the goal of cutting Poland's general government deficit from 8% of GDP in 2010 to 5.6% this year. However, this is due in part to one-off measures such as the diversion of private pension flows into the state budget. The slowdown in Poland and the wider euro area crisis could knock Poland off course unless further, more structural action is taken," said Fitch, the ratings agency.

A further impetus to reform may come from the surprisingly strong performance of Janusz Palikot, a former member of Tusk's party who set up his own grouping and ran on a programme of reducing the influence of the Catholic Church in Polish life as well as slashing red tape, freeing up business and pushing liberal economic reforms.

Palikot's eponymous party took 10% of the vote, heavily skewed towards the young. He is unlikely to become a formal part of the coalition, both because of his views on allowing gay marriage and soft drug legalisation that cause difficulties for the more conservative wing of Tusk's party, as well as the bitter personal relations between the two men - Palikot wrote a tell-all book accusing senior members of Civic Platform of drunkenness and arrogance.

The election ended up being a much clear win for Civic Platform than had seemed possible just a week earlier, when PiS appeared to be gaining momentum in opinion polls. Kaczynski tacked to the centre, dropping scary talk of a Russian conspiracy that killed his brother, Poland's president Lech Kaczynski, in last year's air crash over Smolensk, Russia, and appearing to be a moderate.

However, just days before the election, past comments from Kaczynski that appeared to call into doubt the legitimacy of the election of Germany's Chancellor Angela Merkel again raised the spectre of Kaczynski's visceral dislike of Germany and Russia defining Polish foreiogn policy. As a result, moderate voters roused themselves, handing the election of Tusk and his party. "It was a very professional campaign by PiS, until the very last moment when the whole Merkel issue came up," said Eryk Mistewicz, a political consultant.