Economy, scandals dominate Greek election campaign

ATHENS, Aug 23 (Reuters) Greece's ruling conservatives are trumpeting their economic successes at the start of a campaign for elections that could decide the pace of reforms needed to catch up with the country's European partners.

The euro zone's second poorest member faces tough challenges and analysts say whoever wins the September 16 parliamentary poll must push on with reforms, most urgently that of a pension system that could collapse within 15 years as a result of a low birth rate.

Praised by the EU for turning Greece's economy around, Prime Minister Costas Karamanlis today said his government had shored up public finances and set the country on a dynamic economic growth path in his 3 1/2 years in power.

''More than 210,000 new jobs were created,'' he said. ''We are proud of our work ... but society needs more and our goals are much higher.'' Economists say Greece's EU commitments, such as balancing its budget by 2010 and cutting a balooning public debt, tie the winner of this poll to similar economic policies, but the conservatives are likely to be faster and more determined.

The Socialists say they favour a ''Scandinavian model'' of pro-market policies coupled with social programmes, funded from increased taxes, to relieve the poor and narrow the country's wealth gap.

TOP CONCERNS Pensions, jobs, education and health are top concerns for voters, but the electoral battle will be fought under the cloud of a simmering bond scandal, with prosecutors investigating how pension funds were sold government debt at inflated prices.

Socialist PASOK opposition leader George Papandreou assails the government for what he says are pro-rich policies and corruption, accusing Karamanlis of calling snap polls to silence the bond scandal investigators.

''He came waving the banner of fighting corruption and now he goes to elections under a wave of scandal revelations,'' Papandreou told a rally in central Greece yesterday night.

Despite this and other political and financial scandals, as well as street protest against unpopular privatisations and education reforms, the ruling conservatives lead PASOK by about 1.5 percentage points, two opinion polls showed today.

Analysts say voters do not appear to have forgiven PASOK for its own scandals during its many years in power.

''The bond affair has so far appeared to favour the smaller parties,'' said Alexios Routzounis, general director of the Kapa Research polling agency.

Opinion polls show neither of the two frontrunners winning an easy majority in the 300-seat parliament, and three smaller parties expected to come into the house could end up as power brokers.

Reuters AM GC1523