ATHENS – Greek Prime Minister Costas Karamanlis launched a difficult election campaign on Thursday after calling an early parliamentary vote for October 4 to seek a new mandate and deal with a sharp economic crisis.

The Greek bourse's benchmark stock index was down nearly 4 percent in early afternoon trading, 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.

My act is an act of responsibility, I didn't have the right to let the country be dragged for months in a pre-election atmosphere, Karamanlis said in a televised speech.

He asked President Karolos Papoulias to dissolve parliament as of Monday and declare elections for Oct 4.

Fading support for the government, dragged down by discontent with a sharp economic slowdown, scandals and Greece's worst riots in decades, was hit even more from criticism of its response to forest fires near Athens last month.

I failed, but vote for me again!, left-leaning daily Ta Nea said in its front page headline.

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.

I'm disappointed because they didn't do most of what they had promised, I voted for New Democracy in 2004, said Iakovos Diamantopoulos, 58, a teacher. The scandals, their economic policy, the rises in prices ... they disappointed us.

RISKY BET

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 stock market is falling because the investors are afraid of the possibility that the winning party would not have an absolute majority, said Takis Zamanis, head dealer at Beta Securities.

PASOK may not gather enough votes in this election to form a government alone. This would plunge Greece into political uncertainty as it struggles to cope with the global slowdown, which hits hard key drivers of the economy including tourism.

Greece's economy returned to weak growth in the second quarter but suffered its first annual contraction in 16 years with year-on-year GDP shrinking 0.3 percent, provisional figures by the country's statistics service (NSS) showed on Thursday.

The next government must have quite a substantial majority because the economic problems will not go away, said Grace Amerley Annan, at IHS Global Insight, saying New Democracy had lost credibility by not pushing reforms through, hampered by strikes and a one-seat majority in parliament.

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 had it waited.

PASOK leader George Papandreou, who advocates a green growth economic program, said: It's time for a new course ... We have the strength and the courage to clash with everything that holds our country back.