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Tokarczuk's "work is full of wit and cunning," Anders Olsson, member of the Swedish Academy and chair of the Nobel Committee, told reporters at the academy headquarters in Stockholm's Old Town.
She studied psychology at the University of Warsaw and made her literary debut in 1993, but made her real breakthrough with the novel Prawiek i inne czasy in 1996 (Primeval and Other Times, 2010 in English).
"Her work centres on migration and cultural transitions, visible in one of her most fascinating prose work, 'Flights,'" Olsson added.
He said the committee was "very impressed" by her 2014 historical novel, Jacob's Books, yet to be translated into English.
"This 1,000-page long chronicle gives us not only a vivid portrait of the 18th-century sectarian leader Jacob Frank - by his followers proclaimed the new Messiah - it presents a rich panorama of a little known chapter in European history," he said.
The author said she was stunned when she learned of her win. "It still hasn't sunk in," she told Poland's Gazeta Wyborcza on a telephone call.
She said she was especially pleased that Handke, whom she greatly appreciated, also received the Nobel Prize: "It's wonderful that the Swedish Academy has honoured the literature from Central Europe."
Tokarczuk was born in 1962 in Sulechow and currently lives in Wroclaw. Her parents were teachers.
Handke, meanwhile, received the prize "for an influential work that with linguistic ingenuity has explored the periphery and the specificity of human experience."
"With great artistry he explores the periphery and the unseen places," Olsson said.
Olsson said Handke was "almost speechless" and "very, very touched" on learning of the award after the two had talked on the phone shortly before the announcement.
The author later told Austrian press agency APA that he was happy over the award because the accolade serves as a spotlight.
"It's as if the work that one has created is now exposed to light," he told APA from his home near Paris.
After getting the call from the Stockholm, he went for a four-hour walk in the woods, he said, adding that he might spend Thursday night having dinner in a small local restaurant with his wife.
The 76-year-old novelist, playwright and translator has "a vast production in different genres, narratives, essays, short prose and drama, plays," Olsson said, also noting he has made films.
Olsson mentioned "Repetition" (English version in 1988) where the theme touches on Handke's Slovenian origins on his mother's side. He was born 1942 in Austria's southern Carinthia province.
"A Sorrow Beyond Dreams" (1975 in English) is about his mother's 1971 suicide.
The dual announcement was due to a crisis that engulfed the academy last year, prompting the postponement of the 2018 announcement.
The controversy included alleged breaches of conflict-of-interest rules and a sexual assault case involving the husband of one of its members, poet Katarina Frostenson. She left the academy this year. Her husband, Jean-Claude Arnault, was convicted on two counts of rape in December.
In 2017, the award went to British author Kazuo Ishiguro.
Both Tokarczuk and Handke were intent on attending the December 10 award ceremony in the Swedish capital, Stockholm, Mats Malm, the academy permanent secretary said.
Olsson told reporters "it was a literary prize, not a political prize," when asked about criticism raised against Handke over his stance in the Balkan wars where he appeared to side with the government of Serbian leader Slobodan Milosevic.
As part of its effort to regroup, a five-strong external committee has this year assisted the academy and its four-strong Nobel Committee.
"I felt we all had an equal say," said external member Mikaela Blomqvist, literary critic with the daily Goteborgs-Posten.
"The dialogue has been widened, there has been a different kind of conversation," Olsson said briefly.
The 2018 field comprised 194 candidates, while the academy received 189 proposals for 2019. The proposals were whittled down to a short list of 8 names before the summer recess.
The academy does not publish the list and keeps its deliberations under seal for 50 years.
Nobel prizes this year have already been awarded in the fields of medicine, physics and chemistry.
The Nobel Prize for Peace announcement is due on Friday, while the economics award is expected next week.
With the exception of economics, the prizes were endowed by Swedish industrialist Alfred Nobel (1833-96), the inventor of dynamite.
The awards, each worth 9 million kronor (908,000 dollars) this year, are presented on December 10, the anniversary of Nobel's death.
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