Greece calls May 6 poll that may create stalemate

ATHENS (Reuters) - Greece called a snap election for next month on Wednesday, launching a campaign that may produce no clear winner and threaten implementation of the international bailout plan that saved the nation from bankruptcy.

Prime Minister Lucas Papademos announced the May 6 date after meeting the president and his interim cabinet, which he said had done its job by securing the bailout and a landmark debt restructuring last month.

"Greece is in the middle of a difficult path," he said in a televised address to the nation. "The choices we make will not only determine which government will be formed after the election but Greece's course in decades to come."

Papademos, a former central banker called in last year when a socialist government collapsed, told his ministers he hoped a new parliament, which must pass a slew of tough reforms to secure payments under the bailout, would convene by May 17.

"The last months proved that faced with great problems and huge risks we can cooperate and overcome our differences," he said.

But the first elections since the debt crisis exploded at the end of 2009, dragging the country into its worst recession since World War II and shaking the euro, may be followed by protracted coalition negotiations.

The conservative New Democracy and the Socialist PASOK parties - which backed the Papademos government - have lost public support for endorsing the bailout plan, and may not win enough votes to form a new coalition.

Opinion polls show that small parties which oppose the steep wage and pension cuts imposed by the European Union and IMF in return for aid are gaining ground. A public angry with the cuts has taken to the streets over the past two years in protests that have often turned violent.

Party leaders have already started unofficial campaigning, with conservative leader Antonis Samaras, whose party is ahead in all opinion polls, telling supporters over the weekend that he would raise low pensions and create jobs.

"Greece is now the worst condition it has ever been during times of peace," Samaras said on Wednesday. "Greek people will have the chance to determine their future in this election."

NO OUTRIGHT WINNER

Recent opinion polls show his New Democracy party would win between 18 and 25 percent of the vote, ahead of PASOK's 11-16 percent but far behind the socialists' sweeping 43.9 percent in the pre-crisis election of October 2009.

Samaras has said repeatedly that he is aiming for an outright majority and has warned that he might trigger a repeat election if he does not get enough votes.

Both New Democracy and PASOK back EU/IMF reforms such as opening up of closed professions, slashing the public sector workforce by a fifth and cutting pensions, but Samaras said he would renegotiate some parts of the plan.

Some surveys cast doubt on whether the only two parties that back the bailout can gather enough votes to renew their coalition, although this is still considered the most likely outcome.

Whoever wins the election will have to agree additional spending cuts of 5.5 percent of GDP - or about 11 billion euros - for 2013-2014 and gather about another 3 billion euros from better tax collection to keep getting aid, the IMF has said.

The new government must also implement delayed reforms such as opening up markets and professions.

The Fund has warned the election poses a political risk, casting doubt on the implementation of agreed policies.

The Papademos cabinet also discussed on Wednesday how to boost the capital of Greece's cash-strapped banks, a vital condition for the country's economic recovery.

Highlighting the fiscal challenges of the new government, budget data on Wednesday showed the deficit widening sharply in the first quarter of the year, although coming in below target.

In a move that may appease some frustrated voters, a former defense minister was arrested on money laundering charges.

Television showed images of plainclothes police leading Akis Tsohatzopoulos, 72, away from his luxurious neo-classical mansion at the foot of the Athens Acropolis. His purchase of the house prompted an investigation.

Tsohatzopoulos, who has held various portfolios including defense since the 1980s, faces felony charges in relation to property deals and possible tax violations, a court official said on condition of anonymity. He has denied any wrongdoing.

(Additional reporting by Harry Papachristou; writing by Dina Kyriakidou; editing by David Stamp and Philippa Fletcher)

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