Greece's conservative prime minister won re-election with a diminished majority in parliament after a financial scandal and devastating forest fires that killed more than 65 people last month.
The slimmer majority could make it harder for the government to carry out crucial economic and education reforms, including overhauling Greece's fractured and debt-ridden pension system. But the conservatives inflicted a stronger defeat than expected on their rival socialists, who were seen as being in disarray after receiving the lowest number of parliamentary seats in 30 years.
"Thank you for your trust. You have spoken loud and clear and chosen the course the country will take in the next few years," Prime Minister Costas Karamanlis said on Sunday as thousands of party supporters thronged the streets of central Athens, honking horns, chanting slogans and waving the blue flags of his New Democracy party.
George Papandreou, the leader of the main opposition socialist party PASOK, conceded defeat.
"The people have chosen and their decision is respected. PASOK fought hard but it did not succeed," Papandreou said. "People sensed that the poor state of public administration, with the scandals and fires, had deeper causes."
The results indicated that New Democracy would win enough seats in the 300-member parliament to form a governing majority after the elections, which were called by Karamanlis six months early.
"I asked you to vote for a stable government. Today that government exists, a determined government which will abide by its commitments," Karamanlis said.
With 94 percent of the votes counted, New Democracy was ahead with 42.16 percent, while PASOK had 38.22 percent. The number of spoiled or blank ballots -- often considered a protest vote -- stood at 2.6 percent.
Both major parties lost some support -- but it was PASOK that fared the worst.
"The electorate's message is that we, too, have responsibility for the state of the nation. I ask that we all listen to this message," said Papandreou, who heads the party founded by his father, former prime minister Andreas Papandreou.
PASOK looked set to win just 103 seats in parliament -- the lowest number it has held since 1977, when it had 93 seats.
Papandreou immediately faced a challenge to his party leadership from former culture minister Evangelos Venizelos.
"While PASOK could and should have won, for the good of the country, it lost. We have unfortunately suffered a clear and great defeat," said Venizelos, who effectively declared his candidacy for Papandreou's position.
Karamanlis, 51, easily won the last election in 2004, becoming the youngest prime minister in modern Greek history. The country's economy has done well under the conservatives, with robust consumer spending and strong property market. Growth was expected to continue at more than 4 percent this year -- one of the fastest growth rates in Europe. Unemployment has also plummeted.
When he called the election, Karamanlis had seemed assured of victory. But a week later, fires devastated large parts of Greece.
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