Greek conservatives win second term, face reforms

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

Prime Minister Costas Karamanlis nevertheless voiced confidence his New Democracy party could push through reforms.

''Today you spoke loudly, you spoke clearly,'' Karamanlis told supporters in Athens yesterday. ''You gave new Democracy a clear mandate to continue the changes, to continue the reform the country needs.'' His main rival, opposition socialist PASOK party leader George Papandreou, conceded defeat.

With about 80 per cent of the results counted, the conservative New Democracy looked set to win about 43 per cent of the vote and 154 seats in the 300-seat parliament. Political analysts said that number may go slightly down as results from large traditional socialist strongholds came in.

A thin parliamentary majority could make it hard for the next government to tackle the difficult reforms needed to bring 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.

The far-right LA O S party was winning 35 per cent of the vote and was the first far-right party to make it to parliament since Greece returned to democracy in 1974.

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.

''After three and a half years in power, it's normal the percentage went down,'' said housewife Maria Panopoulou, 39, among thousands of supporters flooding the central Syndagma square to celebrate New Democracy's victory. ''We are very happy. We trust Karamanlis and want him to continue reforms.'' BOISTEROUS CELEBRATIONS New Democracy supporters were clogging Athens, blaring horns, waving party flags and lighting firecrackers.

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 per cent 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 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 economist at Deutsche Bank.

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

REUTERS SYU RAI0835