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Greece set for snap election after PM submits resignation

Greek Prime Minister Lucas Papademos has set the stage for early elections by submitting his resignation to President Carolos Papoulias, after heading a five-month debt rescue.

Mr Papademos said he would ask the president to set the election for 6 May, with a view to having a new government in place by 17 May.

Earlier, Mr Papademos told the cabinet the ballot was necessary to secure a new mandate for reforms.

Mr Papademos, a former central banker called in last year when a socialist government collapsed, noted that his interim administration had fulfilled its mandate of securing the bailout and a landmark debt restructuring last month.

The election will be the first since the debt crisis exploded at the end of 2009, dragging the country into its worst recession since World War II, pushing unemployment to record highs and shaking the euro.

"The main goals of this government have been achieved," said Mr Papademos, who is expected to hand power back to an elected party politician when the next government is formed.

"Today, the election campaign officially starts."

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

Opinion polls show that small parties that oppose the steep wage and pension cuts imposed by the European Union and IMF in return for aid are gaining ground.

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

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

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% of GDP - or about €11bn - for 2013-2014 and gather about another €3bn from better tax collection to keep getting aid, the IMF has said.