Greece's radical leftist party Syriza, which opposes the government's austerity policies, was leading in the key Athens area, exit polls from the first round of local elections showed on Sunday.
Syriza's candidates for the capital's mayor as well as regional governor in greater Athens were ahead in the race against the incumbent socialist office-holders, the televised polls showed.
Syriza want to use these local elections -- and the European polls next week -- as a referendum against austerity and springboard for general elections, which could come as early as February next year.
Prime Minister Antonis Samaras, head of the conservative New Democracy party, had warned that a vote for Syriza could derail reforms demanded by the country's EU-IMF creditors.
Syriza's candidates for the posts of Athens mayor and regional governor have between 20 and 31 percent of the vote. A result of at least 50 percent is required for an outright win in the second round on May 25.
There were other unexpected setbacks for the government.
The pro-government mayor of the main port of Piraeus is lagging behind a candidate openly backed by the city's favorite sports club, Olympiakos.
The third largest city of Patras also looks set to slip away from the government coalition.
But government candidates seemed likely to hold on to the city of Thessaloniki and the key regions of Thessaly, the Peloponnese and Crete.
A government official insisted the fight was far from over.
"For a political verdict, we must wait for the result of the entire vote, not just Athens," New Democracy parliament speaker Makis Voridis told Mega channel.
"The situation will be better (for the conservatives) in the periphery," added Administrative Reform Minister Kyriakos Mitsotakis.
The conservative vote in Athens was split between two candidates, both of whom were eliminated from the second round.
Their voters are likely to give incumbent Athens Mayor George Kaminis a boost in the second round.
The local ballot will gauge support for the embattled government coalition after two years of unpopular austerity reforms in return for EU-IMF bailout loans.
Candidates put forward by the neo-Nazi party Golden Dawn look set to score double-digit results despite an ongoing criminal investigation against the party.
Golden Dawn's candidates for Athens mayor and regional governor are likely to receive between nine and 17 percent of the vote, the exit polls showed.
Ten million voters were registered to elect 325 mayors and 13 regional governors across the country, with second rounds to be held on May 25 where necessary.
New Democracy and Syriza last went head-to-head in June 2012 against a back-drop of fears that Greece was on the verge of being forced out of the eurozone.
Anger over austerity policies propelled Syriza from just 5 percent of the vote to 27 percent in that election, narrowly losing to New Democracy.
Two years later and the fear of a "Grexit" has receded, with a general confidence that the country can finally emerge from six years of grinding recession and retrenchment.
Greece is about to register slim growth in 2014, and painful fiscal reforms mandated by EU-IMF creditors finally seem to be paying off.
But this progress has come at a heavy cost -- record unemployment, mounting poverty and a 25-percent decline in the country's overall output.
Syriza and New Democracy had been neck-and-neck in the polls, with around 20 percent each.
"Even though the vote has local characteristics, in essence this is a test of forces between those who tolerate the government's policies and those seeking to send a message of protest," said political analyst Thomas Gerakis of Marc institute.
Whatever happens, Greece's political landscape has fractured. The days of New Democracy and the socialist PASOK, currently in coalition together, taking 80 percent of the total vote are over as a spate of smaller parties emerges.
Early results are expected around 2000 GMT.
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