Greek conservatives head for election win

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ATHENS, Sep 16 (Reuters) Greece's ruling conservatives looked set today to win a second term but with only a slim majority in parliament that could make plans for economic reforms more difficult.

Prime Minister Costas Karamanlis called the election six months early but then struggled to overcome criticism for his reaction to forest fires that swept large parts of the country in August and killed 65 people.

Early official results, which had yet to reflect voting in large urban areas, showed the conservative New Democracy winning about 44 per cent of the ballots.

Exit polls earlier showed the ruling party winning a thin parliamentary majority that would make it hard for the next government to tackle the difficult reforms aimed at bringing the euro zone's second poorest member in line with its partners.

Conservative Prime Minister Costas Karamanlis and socialist leader George Papandreou, both heirs to prominent political dynasties, seemed to lose support to smaller parties.

An exit poll by the Kapa Research polling company, conducted for Reuters and To Vima newspaper, showed the ruling New Democracy party winning 41.9 per cent of the vote and 152 seats in the 300-seat parliament.

In its 2004 landslide victory, which ended 11 years of socialist rule, New Democracy won 45.36 per cent of the vote and 165 seats in the house.

Although official results were still far from conclusive, New Democracy supporters were clogging Athens, honking horns and waving party flags.

''We are so happy because we trust New Democracy and want to have it for four more years so that it can do what it promised,'' said businessman Mihalis Syrigos, 45, waving flags along with thousands of others in the central Athens Syndagma square.

''It was normal the percentage would go down with all the tragic things that happened last month.'' Karamanlis called the snap poll, confident his EU-pleasing economic record would secure an easy victory. But support eroded after the forest fires and financial scandals - such as the sale of overpriced state bonds to pension funds.

SECOND PLACE With about 25 per cent of ballots counted the Socialist PASOK party was in second place with about 39 per cent of the vote. The exit poll, which has a 1 percent margin of error, showed it winning 38.4 per cent and 103 seats in parliament. PASOK won 40.55 per cent of the vote and 117 seats in 2004.

Political analysts said PASOK appeared unable to capitalise on the government's woes, with many voters not ready to forgive the socialists for their own scandals over 20 years in power.

''The recent events, the ecological and human disaster, turned voters even more towards smaller parties,'' said Kapa Research consultant Gerasimos Moschonas. ''The crucial political point is whether there will be a parliamentary majority.'' The election was seen as key for the pace of economic reforms such as unpopular privatisations and shoring up an ailing pension system. Some analysts said the conservatives' majority may be too thin to pursue difficult reforms ahead.

''The good news is that New Democracy is the party that will continue its supply side economic reforms at least to a larger extent than the opposition would have,'' said Theodor Schonebeck, an economic Deutsche Bank.

Karamanlis has cut deficits and created 200,000 jobs but unemployment remains above the EU average despite a healthy 4.4 percent GDP growth rate this year. Greek per capita GDP is the second lowest in the euro zone after Portugal's.

Reuters RC VP0250

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