Greek PM's snap election call draws criticism

ATHENS, Aug 18 (Reuters) Greek opposition parties and newspapers today criticised Prime Minister Costas Karamanlis for calling early elections, saying the decision was designed to limit political damage from a bond scandal.

Karamanlis, whose conservative government has a slight lead in opinion polls, yesterday called elections for September. 16, six months ahead of schedule. He said he wanted a fresh mandate to push on with economic and social reforms.

''The (ruling) New Democracy (party) is afraid of the bond scandal,'' said George Karatzaferis, leader of the nationalist LAOS party which is expected to enter the new parliament.

His views were echoed by several Athens liberal newspapers which noted that a parliamentary briefing by the head of the money laundering commission, investigator George Zorbas, on the findings of a bond scandal probe would not take place as planned on Tuesday after parliament was dissolved.

More than 60 people face criminal charges for their role in the sale of government bonds to pension funds at inflated prices. Those facing charges are yet to be named and analysts say the government may suffer if members are seen to be caught up in the scandal.

The scandal has already pushed the government's approval ratings to their lowest level since they swept to power in 2004.

''The prime minister's decision to speed up elections hides plans for new taxes, adverse social security measures and fear of the Zorbas finding,'' wrote the major Ta Nea newspaper on its front page.

A series of political and financial scandals and street protest against unpopular privatisations and education reforms have eroded the government's support at home.

The prime minister's party now leads the main opposition Socialists by only one or two percentage points in polls.

REFORM PLANS In a speech to his deputies today, Karamanlis said the government needed voter approval for new measures that would spur economic growth.

''We are asking for a strong popular mandate to continue with needed reforms, changes that guarantee a strong economy and robust growth,'' he said. ''Elections are also tied to the first budget after the country's exit from the EU's excessive deficit procedure.'' His government has won praise from the European Union for shoring up public finances, cutting deficits and pushing ahead with privatisation of the state sector.

Whichever party wins the contest, it will have to tackle problems such as balancing the budget by 2010 and overhauling an expensive state pension system creaking under the burden of an ageing population.

The government says if it is not reformed, the system could collapse within 15 years, and Karamanlis has pledged to start overhauling it in a second term. This will entail raising the retirement age and merging a number of pension funds.

The conservatives also want to reduce the state's involvement in running the economy to improve competitiveness.

Ports and airports could be the next privatisation targets.

Analysts welcomed the fact that the announcement removed an element of uncertainty hanging over Greek financial markets.

''Early elections are positive for the market, the short pre-election period avoids extended uncertainty,'' said Citigroup analyst Lambros Papadopoulos in a note.

''Both leading parties are market friendly but an extension of the term of the current government would ensure continuity and perhaps an accelerated privatisation programme.'' REUTERS SKB RK1745