VIENNA (Reuters) - The partners in Austria's pro-Europe, centrist coalition scraped a combined majority on Sunday despite recording their worst election results since World War Two and losing support to the far-right Freedom Party and a new liberal party.
Chancellor Werner Faymann's Social Democrats (SPO) - who had campaigned on a platform of defending jobs and pensions and redistributing wealth - got 27.1 percent of the vote, down more than two points from 2008, preliminary results showed.
The conservative People's Party (OVP) also shed more than two points to 23.8 percent, giving the two parties that have dominated post-war Austrian politics a combined - albeit reduced - majority for a new five-year term in parliament.
Faymann said he would invite OVP leader Michael Spindelegger to join him in a new coalition government but acknowledged the result was not an overwhelming vote of confidence.
"There is much to do, on the one hand to justify this result and on the other hand to build up more trust for the future," he told ORF television.
Spindelegger said he was open to talks, but refused to rule out a coalition with the far-right Freedom Party (FPO) and the new Eurosceptic party of Austro-Canadian car-parts magnate Frank Stronach - a combination that would be numerically feasible.
"This result is a wake-up call," he told ORF. "We can't simply go on as before."
Sylvia Kritzinger, head of the social science methods department at Vienna University, said she saw Spindelegger's comments as posturing to gain leverage with the SPO.
"I think that the grand coalition is going to continue its work although you can't really call it a 'grand' coalition any longer," she said.
The anti-immigration and anti-Islam FPO, which seeks to end taxpayer-funded bailouts of weaker euro zone countries, boosted its share of the vote by almost four points to 21.4 percent.
"This is an incredible success. We are the election-night victors," said FPO leader Heinz-Christian Strache, 44, a polarising figure who is popular with many young people but anathema to the political establishment that he loves to bash.
Populists hostile to the euro or to immigration have ridden a wave of anger over austerity, recession and unemployment to make inroads from the Netherlands to Italy, France, Finland and Greece since the financial crisis began in 2008.
Their rise highlights the threat to centrist parties in government around Europe that are implementing unpopular austerity policies and structural economic reforms.
More than 10 percent of Austria's nearly 6.4 million eligible voters applied for absentee ballots, which were due to be tallied by Monday, but these were unlikely to change the outcome significantly.
The right-wing Alliance for the Future of Austria (BZO), which split from the FPO in 2005, narrowly failed to win re-election with 3.6 percent.
"Politics hasn't been put on a new track today but it was pretty close," said Wolfgang Bachmeyer, head of Austria's OGM marketing institute.
"If the BZO had scored a few more tenths of a percentage point ... then the decades-long era of the grand coalitions between the SPO and OVP would have been over."
The results set up weeks of haggling over a new government.
At loggerheads on tax, education and other issues, the coalition parties have been avoided structural reforms in favour of minor policy adjustments, eager not to stall the export-driven economy.
Last year they were able to cobble together a 27 billion euro ($37 billion) package of spending curbs and tax hikes that aims to balance the budget by 2016.
But finances are under pressure from the cost of supporting the ailing nationalised bank Hypo Alpe Adria.
Critics say the coalition's lack of appetite for robust reform may over time jeopardise the high standard of living that most of Austria's 8.4 million residents enjoy.
The ruling parties had counted on their record in guiding Austria through the crisis relatively unscathed to win another term.
But unlike in neighbouring Germany, where Chancellor Angela Merkel scored a landslide victory on September 22 partly on the strength of the German economy, many voters felt hard done-by, despite the lowest jobless rate in the EU and economic growth well above the EU average.
A string of corruption scandals has also contributed to disenchantment with mainstream Austrian politicians.
The environmentalist Greens, who would have been likely to join the existing coalition parties in government had they failed to secure a majority, gained one point to win 11.5 percent.
Strache's FPO could not overtake the OVP due to competition from car-parts magnate Frank Stronach's new party, also Eurosceptic but without the FPO's anti-foreigner tone.
Team Stronach got 5.8 percent, ahead of the evening's other big winner, the new liberal party Neos, which got 4.8 percent - above the 4 percent threshold needed to enter parliament.
Editing by Kevin Liffey