Greek conservatives win second term in office

ATHENS, Sep 17 (Reuters) Greece's ruling conservatives won a second term in elections despite public anger over their reaction to deadly forest fires, but their slim majority could hinder plans for implementing economic reforms.

Prime Minister Costas Karamanlis claimed victory yesterday after his main rival, opposition socialist PASOK party leader George Papandreou, conceded defeat.

''You gave us a clear mandate to continue with the reforms the country needs,'' Karamanlis told supporters in Athens. ''I feel doubly responsible to be more effective and avoid mistakes.'' With about half of the results counted, the New Democracy was winning about 43 per cent of the vote and 156 seats in the 300-seat parliament. Political analysts said that number may go down as results from large traditional socialist strongholds come in.

Exit polls earlier showed the ruling party winning a thin parliamentary majority that could 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.

Karamanlis and Papandreou, both heirs to prominent political dynasties, seemed to lose support to smaller parties.

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.

''It was normal the percentage would go down with all the tragic things that happened last month,'' said businessman Mihalis Syrigos, 45, waving flags along with thousands of others in the central Athens Syndagma square. ''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.'' New Democracy supporters were clogging Athens, honking horns, waving party flags and lighting fire crackers.

FIRES SINGE SUPPORT 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.

The Socialist PASOK party was in second place with about 38 percent of the vote and 103 seats in parliament, compared with 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.

''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 VP0425