Greek Prime Minister Costas Karamanlis launches a difficult election campaign on Thursday after calling early parliamentary elections to seek a new mandate and deal with a sharp economic crisis.
The Greek bourse's benchmark stock index <.ATG> was down 3 percent at 0819 GMT, one of the biggest losses in Europe, in what analysts said was fear of political uncertainty and concern that no party would win outright.
Elections were not due before 2011 but the opposition socialists would have forced an early vote in March, pushing Karamanlis to take a risky gamble and pick a date although his conservative New Democracy party lags behind PASOK in polls.
"I failed, but vote for me again!," left-leaning daily Ta Nea said in its front page headline.
Fading support for the government, dragged down by discontent with a sharp economic slowdown and scandals, was hit even more after criticism of its response to forest fires near Athens last month.
Attacks such as a car bomb which exploded outside the Athens stock exchange on Wednesday, which police suspect was staged by a leftist or anarchist group, have further hurt the government. Greece also suffered its worst riots in decades in December.
RISKY BET
Karamanlis will visit the president to seek his consent and announce the date — which a senior government source said will be Oct 4.
"The consequences of the economic crisis are visible … Taking necessary measures imposes one solution: the clearing of the political landscape and a fresh popular mandate," Karamanlis said in a televised speech announcing the snap vote on Wednesday.
Seen by investors as the euro zone's weakest link, Greece's economy faces this year its first recession since 1993 while its national debt is ballooning.
The Greek stock market reacted negatively to the move.
"The stock market is falling because the investors are afraid of the possibility that the winning party would not have an absolute majority," Takis Zamanis, head dealer at Beta Securities, told Reuters.
The socialist PASOK may not gather enough votes in this snap vote to form a government alone, which would plunge Greece into political uncertainty as it struggles to cope with the global slowdown.
The conservatives are about 6 percentage points behind the main opposition socialists in opinion polls. But analysts said New Democracy would face an even harsher defeat if it had waited as the country is seen as falling in recession this year.
"The Prime Minister has taken a politically risky decision. PASOK has undoubtedly a political headstart into this campaign," political analyst Takis Theodorikakos said.
PASOK leader George Papandreou, who advocates a "green growth" economic programme, said: "It's time for a new course … We have the strength and the courage to clash with everything that holds our country back."
