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Top candidate and head of far-right Freedom Party (FPOe) Heinz-Christian Strache talks with journalists in front of a polling station in Vienna, Austria October 15, 2017. REUTERS/Michael Dalder

(reuters_tickers)

By Shadia Nasralla and Kirsti Knolle

VIENNA (Reuters) - Young conservative star Sebastian Kurz is on track to become Austria's next leader after an election on Sunday, but his party is far short of a majority and likely to seek a coalition with the resurgent far right.

Foreign Minister Kurz, who is just 31, managed to propel his People's Party to first place by taking a hard line on immigration that left little space between it and the far-right Freedom Party (FPO).

Both parties increased their share of the vote from the last parliamentary election in 2013, projections showed, marking a sharp shift to the right in the wake of Europe's migration crisis. Chancellor Christian Kern's Social Democrats were in a close race with the FPO for second place.

"I am truly overwhelmed," Kurz told cheering supporters at an election party after polls closed. "We made the impossible possible. Thank you very much for your commitment and this historic success."

He was less effusive about his coalition plans. Kurz repeatedly declined to say which option he favoured, adding that he wanted to await the count of postal ballots that will settle the race for second place.

The bulk of those ballots, which are roughly a sixth of those cast, will be counted on Monday.

"Let's give it a couple of days. Then we will see what the result really looks like," Kurz told broadcaster ORF when pressed on what he plans to do. He said he intended to talk to all parties in parliament and did not rule out forming a minority government.

Austria, a wealthy country of 8.7 million people that stretches from Slovakia to Switzerland, was a gateway into Germany for more than 1 million people during the migration crisis that began in 2015. Many of them were fleeing war and poverty in the Middle East and elsewhere.

Austria also took in roughly 1 percent of its population in asylum seekers in 2015, one of the highest proportions on the continent. Many voters feel the country was overrun.

Kurz's strategy of focussing on that issue appears to have paid off, despite economic growth on track to be the fastest in six years and falling unemployment touted by Kern, who depicted Kurz as the candidate of the rich.

A projection by pollster SORA showed Kurz's People's Party (OVP) winning the election with 31.6 percent of the vote, based on a count of all non-postal ballots. The OVP's current coalition partners, Kern's Social Democrats, were on 26.9 percent, just ahead of the FPO on 26.0 percent.

The projection had a margin of error of 0.7 percentage points, meaning the race for second place was too close to call.

Another projection by pollster ARGE Wahlen had the Social Democrats just 0.5 percentage points ahead of the FPO.

CHEERS

The FPO was short of its record score of 26.9 percent, achieved in 1999, but still has a good chance of entering government for the first time in more than a decade. The OVP and the Social Democrats are at loggerheads, meaning the FPO is likely to be kingmaker.

FPO leader Heinz-Christian Strache, who has accused Kurz of stealing his party's ideas, declined to be drawn on his preferred partner.

"Anything is possible," he told ORF. "We are pleased with this great success and one thing is clear: nearly 60 percent of the Austrian population voted for the FPO programme."

The FPO has an anti-immigration, anti-Islam agenda similar to its French sister party, the National Front, but is less eurosceptic. It has backed away from comments cheering Britain's vote to leave the European Union, merely calling for Brussels to hand more power to member states.

Kurz supporters cheered when the FPO initially appeared to be ahead of the Social Democrats, which would have made an alliance between the FPO and the centre-left party unlikely. [L8N1MQ0XZ]

Kurz, named party leader only in May, called an end to the current alliance with the Social Democrats, forcing Sunday's snap election. He has pledged to shake up Austrian politics, dominated for decades by coalitions between those two parties.

While that would suggest he will turn to the FPO, he has also said there could be leadership changes within the losing parties, a possible hint at being willing to work with the Social Democrats if Kern were ousted as leader by Defence Minister Hans Peter Doskozil.

Kern, however, said he intended to stay on as party leader.

Asked if the loss would have an impact on his political career, Kern told ORF: "No, I have said I will stay in politics for 10 years and there are nine years to go."

The Social Democrats (SPO) have also lifted a self-imposed ban on coalitions with the FPO, meaning the far-right party may be able to play the two parties off against each other during coalition talks. But it is highly unlikely the Social Democrats would ally with the FPO if the SPO came third.

For graphic on Austrian parliamentary election, click - http://tmsnrt.rs/2hKIi65

(Additional reporting by Michael Shields; Writing by Francois Murphy; Editing by Catherine Evans)

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