Greek election race tightens into dead heat

ATHENS (Reuters) - A flurry of polls on Saturday showed the race to lead Greece has tightened into a dead heat ahead of an election next month that could determine whether it remains in the euro.

Greece was forced to call the new vote for June 17 after an election on May 6 left parliament divided evenly between groups of parties that support and oppose austerity conditions attached to a 130 billion euro rescue agreed with lenders in March.

The failure of the two parties that dominated Greece for decades to win a pro-bailout majority, and the success of the anti-bailout radical leftist SYRIZA party which came second, have sent shock waves through Europe.

The overwhelming majority of Greeks want to keep the euro, but oppose the austerity conditions agreed with the EU and International Monetary Fund. If Greece renounces the bailout, EU leaders say they will pull the plug on funding, leading to rapid bankruptcy and an exit from the single currency.

Leaders of Group of Eight nations on Saturday backed keeping Greece in the euro but signaled it should keep to its bailout terms. "We reaffirm our interest in Greece remaining in the euro zone while respecting its commitments," they said in a communique after a summit at Camp David.

Of four polls published on Saturday, two put SYRIZA ahead and two put the conservative New Democracy party ahead. Three of the four polls showed gaps of less than 1.7 percent of voters separating the two parties.

Greece's election rules give the party that comes first an automatic bonus of 50 seats in the 300 seat house, meaning even the slightest edge could play a decisive role in determining who forms the next government.

Polls since the May 6 election have shown SYRIZA and the two pro-bailout parties all improving their performance at the expense of smaller parties. That means whoever wins this time should be in a stronger position than last time.

SYRIZA's charismatic 37-year-old leader Alexis Tsipras has emerged in the election campaign as a star, catapulting him to the forefront of the anti-bailout campaign. He appeals in particular to the youth in a country where more than half of young people are jobless after five straight years of recession.

He says European leaders are bluffing when they warn Athens could be forced out of the single currency, and Greece can demand far more lenient terms because EU states will be desperate to avoid the cost of breaking up the euro bloc.

"He is a young politician and I believe he is telling the truth," said Nicos Arvanitis, 38, selling pistachios in an Athens shop. "He can get us out of the crisis. I'm not afraid they'll kick us out of the euro. It's political blackmail."

New Democracy and the Socialists will be trying to scare voters who deserted the traditional parties into returning to fend off catastrophe, arguing that electing Tsipras would mean the end of Greece's membership of the euro zone.

BANK WITHDRAWALS

Greeks have been withdrawing hundreds of millions of euros a day from their banks, a trend which can continue only as long as the European Central Bank is willing to provide Greek banks funding through the Bank of Greece.

A Sunday newspaper, Proto Thema, reported that senior bankers had met at the Bank of Greece last week to discuss measures, including possible limits on withdrawals. A Bank of Greece spokesman denied any such meeting had taken place.

"The Bank of Greece dismisses categorically an article in a Sunday newspaper which refers to an alleged plan to limit withdrawals and capital movements abroad," the bank said in a statement.

Banking experts say imposing limits on withdrawals could be self-defeating, because it might cause a panic.

One of the elements of the bailout is a recapitalization plan to ensure the banks are still solvent and have enough capital to keep borrowing from the ECB. The Frankfurt-based euro zone central bank said last week it had halted direct funding to some Greek lenders because their capital had fallen too low.

New Democracy's Antonis Samaras, who largely ignored Tsipras in the last campaign, has invited him to a televised debate. A spokesman for SYRIZA said the party was open to the idea.

Greeks have bristled at what they see as bossy behavior by European leaders. Newspapers were filled with outrage at news that German Chancellor Angela Merkel had phoned Greek President Karolos Papoulias on Friday and discussed the idea of Greece holding a referendum on its euro zone membership.

Tsipras accused the German chancellor of talking to Greek leaders as if Greece were a German "protectorate". Samaras called the idea "unfortunate to say the least" and said Greeks, who overwhelmingly support the euro, do not need a referendum to demonstrate that.

Berlin denied Merkel had pushed any such proposal on Papoulias. Interim Greek Prime Minister Panagiotis Pikrammenos said he considered the matter closed.

(Additional reporting by George Georgiopoulos and Lefteris Papadimas; Writing by Peter Graff; Editing by Andrew Heavens)

(This story was corrected to remove reference to a German reporter overhearing conversation between Merkel and Papoulias in paragraph 20)

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