Greek PM ousted in election defeat

Greece's Socialists have trounced the governing conservatives in a landslide election, with voters angered by scandals and a faltering economy ousting Prime Minister Costas Karamanlis halfway through his second term.

Humbled by his New Democracy party's worst electoral performance ever, Karamanlis, 53, resigned on Sunday as its leader and said a new chief is now needed for the party founded by his late uncle Constantine Karamanlis 35 years ago.

Papandreou, 57, now follows in the footsteps of his father, party founder Andreas Papandreou, and grandfather and namesake George Papandreou, both of whom served several terms as prime ministers.

Results from 49.77 per cent of votes counted showed former foreign minister George Papandreou's Panhellenic Socialist Movement, or PASOK, winning with 43.59 per cent, compared to 34.99 per cent for New Democracy.

The result gives PASOK a comfortable majority of about 159 seats in the 300-member parliament, bringing the party back to power after five years of conservative governance.

Papandreou's victory, along with a recent election win by socialists in Portugal, bucks a European trend that has seen a conservative surge in the continent's powerhouse economies, including most recently in Germany, where Chancellor Angela Merkel won re-election last week.

"This is a historic victory for PASOK, which means great responsibility for us," senior party official and former minister Evangelos Venizelos said outside party headquarters, surrounded by jubilant supporters lighting flares and waving PASOK flags depicting the party's symbol of a green rising sun.

Papandreou will now have to deal with a faltering economy that is expected to contract in 2009 after years of strong growth, while the budget deficit will probably exceed 6 per cent of economic output.

In contrast to Karamanlis, who advocated an austerity program of freezing state salaries, pensions and hiring, Papandreou has promised to inject up to 3 billion euros ($A5 billion) to jumpstart the economy.

However, his government will likely have to borrow heavily just to service the ballooning debt - set to exceed 100 per cent of GDP this year - and keep paying public sector wages and pensions. Papandreou has pledged to limit borrowing by reducing government waste and going after tax dodgers.

Thousands of cheering supporters mobbed a smiling Papandreou as he arrived at the central Athens headquarters while the results trickled in. Others drove through the city honking their horns.

Karamanlis, looking tired and downcast, congratulated his rival.

"From the depths of my heart, I wish to thank the voters who backed us in these elections. I wish to congratulate George Papandreou for his victory," he said in a brief speech in central Athens. "We hope he succeeds in the great challenge of facing the economic situation."

Karamanlis announced the early election just halfway through his second four-year term in an ultimately failed gamble to win a strong new mandate to tackle Greece's economic woes. But he had already been trailing in opinion polls when he called the election last month, sparking criticism from within his own party.

Karamanlis stormed to power in 2004 to become the youngest prime minister in modern Greek history after more than a decade of socialist rule. He was re-elected in 2007, but quickly saw his popularity eroded by several financial scandals, including a land-swap deal with a Greek Orthodox monastery that cost the state more than 100 million euros ($A167.2 million) and forced two of his close aides to resign.

The failure of authorities to contain widespread riots sparked by the fatal police shooting of a teenager in Athens in December also undermined the conservatives' position, which the global financial crisis finished off.

Many conservative voters were angered by rising crime and the riots, when anarchists rampaged through Greek cities, smashing shops and banks with little police intervention.

"What I believe is happening today is that Karamanlis is paying for his past mistakes, for the financial situation," voter Alexandros Panagiotakopoulos said outside New Democracy's headquarters while watching the results on a giant outdoor screen.

The Greek Communist Party, far right-wing LAOS and the small Left Coalition are expected to retain their representation in parliament, while the Ecologist-Greens were hovering on the fringe of the 3 per cent threshold for entry.