WARSAW (Reuters) -- Polish conservative twins Lech and Jaroslaw Kaczynski will firm their grip on power this week, raising concerns at home and abroad about a further tilt toward nationalism in the biggest ex-communist European Union member.

In a surprise decision on Friday, Jaroslaw, leader of the ruling Law and Justice Party, decided to replace popular Prime Minister Kazimierz Marcinkiewicz after clashing with him over appointments to state posts.

Kaczynski is due to be confirmed by Parliament this week and appointed by his look-alike brother Lech, the Polish president, in a ceremony at the presidential palace.

Marcinkiewicz's departure and the consolidation of power in the hands of the Kaczynskis, 57, caused alarm among investors on Friday because they are viewed as prickly and combative traditionalists with little understanding of modern business.

EU diplomats and opposition figures saw Marcinkiewicz, barely eight months in office, as the leading voice of moderation in the Cabinet and a guarantee that Poland would remain in the European mainstream.

"I am afraid that with Jaroslaw Kaczynski as new prime minister Poland will become more extreme, more anti-European and more xenophobic," said Bronislaw Komorowski, a senior figure in the opposition Civic Platform.

The Kaczynskis see euro adoption, to which Poland is committed by the EU accession treaty, as a move that will limit hard-won national sovereignty and have a confrontational style in foreign policy that puts them at odds with EU partners.

Their governing alliance with anti-Western, far-right nationalists and fringe leftists earlier this year prompted concern among Poland's Western partners and led domestic critics to accuse the Kaczynskis of pushing Poland into isolation.

The Kaczynskis, former anti-communist activists, insist they are good Europeans, who are simply more assertive in defending national interests than their leftist and centrist predecessors who ruled since communism collapsed in 1989 until last year.

But they raised eyebrows abroad and prompted accusations of incompetence at home again this week when they demanded an official condemnation by Berlin of a satirical article in a German paper that lampooned them.

Their party was at pain on Sunday to cast the reshuffle as having nothing to do with policy but as a tactical move ahead of local elections in November, freeing Marcinkiewicz to deploy his popularity in the key contest for Warsaw mayor.

The financial markets look set to open nervously on Monday after the zloty fell 1.4 percent to 4.08 to the euro on Friday.

Some analysts said, however, that the Polish currency could rebound, given that the reshuffle seemed to be more about internal infighting than policy -- a belief reinforced by Kaczynski who vowed continuation of policies.

In a bid to calm markets, he picked a reform-minded former bank economist Stanislaw Kluza to be his finance minister.

Kluza told Reuters in an interview on Sunday that fiscal reforms and tight budget policies would be his main priority and that Poland was set to meet euro zone criteria in 2009.