First-round result

41.2%: Socialists 40.3%: Fidesz 5.6%: Alliance of Free Democrats 4.4%: Party of Justice and Life Turnout: 71%

Mr Orban's conservative Fidesz party said all was not lost for the second round, even though it is running slightly behind the Socialists and has no potential coalition partners.

The third-place liberal Alliance of Free Democrats (SZDSZ) has opened negotiations with the Socialists for a power-sharing deal while the far-right Party of Justice and Life will get no parliamentary seats after it polled less than the required 5% in the first round.

Peter Medgyessy, the Socialist candidate for prime ministers, said discussions had addressed the sharing out of ministerial portfolios with the SZDSZ.

Rural vote 'vital'

While they had agreed on the nomination of economist Csaba Laszlo as finance minister, they were concentrating on securing power first.

Mr Orban believes Fidesz could yet win the second round

"The stake is to win the elections so our talks are focusing on that," he said.

But the president of the right-wing Fidesz party, Zoltan Pokorni, said the vital rural vote still gave the party a good chance.

"Fidesz is confident that we can turn the vote around in the second round," he said.

Experts predict a Socialist victory though, and the Budapest stock exchange surged 300 points on that assessment.

Booming economy

Analysts said dealers were anticipating several key measures pledged by the Socialists, including less state intervention in the market.

Mr Medgyessy promised: "We can guarantee predictability for the economy."

Hungary has the most thriving economy in central Europe and hopes to join the European Union by 2004.

But the Socialists claim the economic boom has benefited only part of society, leaving a huge gap between the haves and have-nots.

Sunday's round of voting decided 185 of the 386 parliamentary seats while the rest will be decided in the second round.

The first-round polls were marked by a record 71% turnout, the highest in the four elections held in post-Communist Hungary since 1989.