Poland's conservatives, having captured the presidency, set a Saturday target for forging a government with pro-business allies. The Polish zloty fell on fears that fiscal and market reform might be slow in coming.
Conservative Warsaw mayor Lech Kaczynski defeated free market champion Donald Tusk in Sunday's presidential runoff after campaigning hard on a promise to root out corruption and shore up welfare protection in the new European Union member.
The zloty fell as expected on Monday, reflecting market concern that Kaczynski's victory tips the balance in favor of a party skeptical about radical fiscal and market reforms and the merits of fast adoption of the euro.
Kaczynski said Poland could hold a referendum on the euro in 2010, which the outgoing leftist government set as a soft target date for entry.
The zloty was 0.7 percent weaker against the euro and 1.4 percent against the dollar, and analysts said progress in coalition negotiations should cap further losses.
"If there's a large sell-off and the signs grow that the coalition is coming together, I would see it as an opportunity to buy the zloty," a senior London-based analyst said.
The bruising presidential campaign stalled talks on forming the next government between the two parties, political heirs to the pro-democracy Solidarity movement and negotiations will restart on Monday, officials said.
The conservative prime minister-designate Kazimierz Marcinkiewicz said he hoped to conclude the talks by Wednesday and to form the cabinet on Saturday.
PARTNERSHIP
"We want a partnership of two big parliamentary groups, tilted toward one of them," he said. "The voters showed where this tilt should be by voting for Law and Justice and Lech Kaczynski."
Kaczynski's triumph seals a swing to the right after his Law and Justice and Tusk's Civic Platform crushed the ruling left in general elections four weeks ago.
With ballots from 91 percent of voting districts counted, Kaczynski has 54.5 percent of the vote and Tusk 45.5 percent. Full results are due around 1200 GMT on Monday.
Tusk's Civic Platform said they would not give up on their campaign pledge to lower taxes and cut red tape to spur growth and reduce Poland's 18 percent unemployment, the EU's highest.
They acknowledged, however, that their flagship proposal to introduce a flat, 15 percent tax was now dead.
The debate between the two parties chimes with a wider EU discussion about reforming the European social model.
EU leaders are meeting in Britain this week to seek a compromise between those pushing the bloc toward more liberal economic policies, led by Britain, and those favoring the welfare state.
Poland will be represented by outgoing leftist Prime Minister Marek Belka, who is expected to discuss Warsaw's position with Marcinkiewicz.
President-elect Kaczynski is likely to keep a low profile in the next few weeks as he rests after the campaign.
He takes over from outgoing leftist President Aleksander Kwasniewski on December 23. Kwasniewski could not seek re-election after two five-year terms in office.
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