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By Karolina Slowikowska

WARSAW, April 17 (Reuters) - Polish Prime Minister Jaroslaw Kaczynski warned his unruly party and his parliamentary allies on Tuesday to close ranks, saying he did not rule out early elections amid a bruising dispute on abortion.

The dispute raised the prospect of some deputies leaving Kaczynski's Law and Justice party to form a separate grouping, which could deprive the three-party coalition of a majority.

Asked on Polish public radio if early elections could be ruled out, Kaczynski replied:

"One can never rule out early elections because this situation, the option of early elections, can always occur in democratic countries."

Financial markets brushed off his remarks, with some players saying Kaczynski had used similar threats in the past to discipline his troops. Regular elections are scheduled for 2009.

Analysts say investors tend to ignore Poland's volatile politics because of the strong economic fundamentals.

However, Finance Minister Zyta Gilowska warned investors on Monday that political bickering may hurt her plans for fiscal reforms necessary for euro zone membership.

The abortion debacle last week was the latest row to hit the coalition, which also includes the far-right League of Polish Families and rural Self-Defence.

Parliament rejected the coalition's proposals to toughen abortion laws last week, largely because the three parties argued on how far to go.

A majority in Law and Justice wanted to enshrine the current strict law in the constitution but a vocal minority sided with the League which sought a total constitutional ban.

Current legislation allows abortions when pregrancy is the result of rape or if the mother's health and life are in danger.

Up to 20 Law and Justice pro-life deputies could walk, according to media reports, led by lower house speaker Marek Jurek.

Jurek resigned from Law and Justice on Saturday and said he would give up his post in parliament. A vote on his replacement would be the first test if Kaczynski can still count on a majority in the lower house.

(Additional reporting By Piotr Bujnicki and Kuba Jaworowski)

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