WRAPUP 4-Stunning Thai Election Win Brings Hope of Stability

(Adds coalition plans, quote from Thaksin)

* Size of win cuts chance opponents can stop party taking power

* Size also makes military meddling less likely, analysts say

* Stock market, Thai baht rise; focus on economic policies

By Jason Szep and Vithoon Amorn

BANGKOK, July 4 (Reuters) - Thailand's powerful military accepted on Monday a stunning election victory by the party of fugitive former Prime Minister Thaksin Shinawatra, adding to a new sense of stability in a country plagued by unrest since his ouster in a coup five years ago.

A day after the victory by the Puea Thai Party headed by Thaksin's youngest sister, Yingluck Shinawatra, the military agreed not to intervene or stop her from forming a government, according to the outgoing defence minister.

"I can assure that the military has no desire to stray out of its assigned roles," said General Prawit Wongsuwan, a former army chief close to military leaders involved in the 2006 coup that removed Thaksin

"The army accepts the election results," he told Reuters.

Puea Thai's outright majority of an estimated 264 seats in the 500-seat parliament makes it hard for Thaksin's rivals to stop Yingluck becoming Thailand's first woman prime minister, which might have ignited protests by her red-shirted supporters who clashed with the army in deadly unrest last year.

"Winning by a big margin eases the problem of military intervening and makes it easier for them to form a government and implement all the policies," said Kongkiat Opaswongkarn, chief executive of Asia Plus Securities.

Yingluck announced she would form a five-party coalition controlling 299 seats, or about 60 percent of parliament, giving her a strong hand to fulfil her election promises.

The 44-year-old businesswoman plans to roll out a long list of Thaksin-style populist programmes that could influence the direction of Southeast Asia's second-largest economy - from subway extensions to big wage increases and various giveaways aimed at boosting spending power, especially in rural areas.

Thai stocks jumped more than 4 percent as the scale of her victory persuaded some investors that Thailand could be more stable after the six-year crisis marked by the occupation of Bangkok's two airports, a blockade of parliament, an assassination attempt and bloody street protests.

Thailand's baht currency rose 1 percent to a one-week high against the dollar on hopes foreign investors would return following $1.4 billion of outflows of global capital since the election season revved up in May.

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Full Thai election coverage:

Graphic timeline of crisis: http://link.reuters.com/bac99r

Election preview graphic: http://link.reuters.com/xak89r

Thailand special report PDF: http://r.reuters.com/cad99r

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REBUKE OF ELITE

The vote is an unexpectedly strong rebuke to the traditional establishment of generals, old-money families and royal advisers who backed Prime Minister Abhisit Vejjajiva. It suggests broad support for policies championed by Thaksin, a divisive figure elected prime minister twice, in 2001 and 2005.

Supporters say Thaksin revolutionised Thai politics with pro-business reforms and populist policies aimed at eradicating poverty. Critics accuse him of authoritarianism, crony capitalism and of undermining the monarchy.

"Puea Thai's big victory eases tensions for now but Thailand is still vulnerable," said Kan Yuanyong, director of the Siam Intelligence Unit, a consultancy. "They will wait for Puea Thai and Thaksin to slip up, then we'll see them strike back. This election was not the final battle between Thaksin and his enemies. There will be more."

Kan predicted anti-Thaksin yellow-shirt protesters would once again flood the streets if Yingluck seeks an amnesty that clears her brother of corruption charges and brings him back to Thailand from self-imposed exile in Dubai.

The yellow-shirted People's Alliance for Democracy, a motley collection of businessmen, academics and royalists, emerged in 2005 to rally support for toppling Thaksin and two subsequent pro-Thaksin governments.

Thaksin told reporters he had no desire to be prime minister again and wasn't pursuing $1.4 billion of his assets seized after a Thai court accused him last year of tailoring government policies to benefit his family.

"Don't worry about it. I'm not starving," he said of he money when asked by reporters at his villa in Dubai, where he lives to avoid jail for graft charges handed down in Thailand in 2008 in a case he says was politically motivated.

"I want to retire," he added. He has said he would "wait for the right moment" to come home. "Going back is not necessarily going to be going back into politics. I may turn pro in golf," he said with a laugh.

INFLATIONARY BACKLASH

Thaksin brushed aside concerns of an inflationary backlash from his younger sister's campaign promises, including a roughly 40 percent rise in the minimum wage. Yingluck dismissed criticisms over the cost of her policies such as free tablet PCs for nearly a million children and tax cuts.

"We know what to do. We'll reduce costs for people and we know how to generate the income that we'll give back to them," she told Reuters.

Economists said the policies may force the Bank of Thailand to raise interest rates for a longer period than had been expected to control any increase in inflation.

But they said billions of extra dollars pumped into Thailand's rural economy will stimulate consumption. Under Thaksin, money funnelled into villages through a debt moratorium for farmers and cheap loans had a knock-on effect on the whole economy, fuelling a boom in household spending.

Under Thaksin, Thailand's economy grew on average by 5.7 percent a year between 2002 and 2006, compared with growth of 2.2 percent in 2001 and the economic turmoil of the late 1990s. But his policies also drove up household debt and did little to fundamentally alter income gaps between rich and poor.

The stridently anti-Thaksin Nation newspaper accepted the result but pulled no punches on the challenge ahead.

"The election is over but the hatred remains," it headlined its leader column. "It's time for ordinary Thais to take reconciliation into their own hands."

Yingluck's red-shirted supporters accuse the rich, the establishment and army top brass of breaking laws with impunity -- grievances that have simmered since the 2006 coup -- and have clamoured for the return of Thaksin.

Her critics say she is a simple proxy for Thaksin, who they accused of abusing his electoral mandate to systematically dismantle constitutional checks and balances while cementing his own authoritarian rule while in power from 2001 to 2006.

Abhisit announced on Monday his resignation as party leader.

His legacy is unclear. Backed by the army, he put down a protest movement by the red shirts sin Bangkok last year and 91 people lost their lives. Nearly 2,000 were injured. But he was also lauded by economists for steering Thailand out of the financial crisis. (Additional reporting by Panarat Thepgumpanat, Jason Szep and Martin Petty in Bangkok; Praveen Menon in Dubai; Editing by Nick Macfie and Alan Raybould)