Basescu has promised a different style of leadership

Prime Minister Adrian Nastase admitted defeat shortly before official results showed Mr Basescu, mayor of Bucharest, had won more than 51% of the vote.

Mr Basescu will steer Romania into the European Union in 2007 and must speed up reforms required for entry.

He replaces ex-communist Ion Iliescu who has dominated Romania for years.

With all returns counted, Mr Basescu took 51.23% of the vote compared to 48.77% for Mr Nastase, who was the outgoing president's choice of successor.

Mr Basescu, 52, said his priority was to form a government capable of continuing membership negotiations for Romania to join the European Union.

Opposition supporters started celebrating on Sunday evening

"We must succeed in living up to the necessary standards so that Romanian society meets the demands of the Union," he told journalists.

He warned that Euro-scepticism arose when people were "frozen out of the integration process".

The centre-right victor also pledged tough action on hidden poverty and described corruption as "a real threat to the country".

The opposition camp scented victory on Sunday evening and supporters spilled out onto the capital's streets, clutching opposition orange flags and balloons and singing and dancing.

Mr Basescu has called for the celebrations to be peaceful and a rally is planned for Monday evening.

Horse-trading

The BBC's Nick Thorpe reports from the Romanian capital, Bucharest, that it was a dramatic few hours before the result was announced and the prime minister's Social Democrats appeared stunned by the outcome.

Romania cannot afford a pause - we want work, cooperation and responsibility Adrian Nastase defeated candidate

Opinion polls had shown Mr Nastase in the lead shortly before the vote, the second of two rounds.

Acknowledging defeat in a telephone call to Mr Basescu, Mr Nastase appeared to offer a co-habitation deal in parliament.

No party has an absolute majority and the Social Democrats have slightly more seats than Mr Basescu's alliance of Liberals and Democrats.

"Romania cannot afford a pause - we want work, co-operation and responsibility," said Mr Nastase.

He had won the first round of the election on 28 November, during which there were allegations of fraud, gaining 41% of the vote compared to Mr Basescu's 34%.

Our correspondent notes that Mr Basescu is expected to ask his political partner, Calin Popescu Tariceanu, to try to form a government.

Although presidential powers in Romania are limited, the head of state will play a pivotal role in the hung parliament.