Costas Simitis will stand down at the next elections

Mr Simitis also confirmed widespread speculation that he was stepping down as leader of the Panhellenic Socialist Movement (Pasok).

The prime minister had to call an election before May, when his party's four-year term expires.

The party is said to be trailing the opposition conservative New Democracy Party in opinion polls.

Mr Simitis is expected to nominate his popular foreign minister, George Papandreou, to replace him as party leader.

Family ties

The announcement was broadcast nationally.

"I will start the necessary procedures for the election of a new president of Pasok," he said.

Mr Simitis has done a generous and responsible thing. We will take up the challenge George Papandreou Greek Foreign Minister

"I will remain prime minister until the elections."

Mr Simitis said it was time for "a younger generation" to take responsibility and take forward the work of modernising Greece and its convergence with the European Union.

"The time has come for me to take the next step for the renewal of our political life," he said. "The (new) leader has to represent this renewal."

Mr Simitis took over the Socialist leadership in 1996 shortly before the death of Andreas Papandreou, the party founder and father of the foreign minister.

George Papandreou's grandfather, also called George, was prime minister in the 1960s.

Reacting to Mr Simitis' announcement, he said: "Mr Simitis has done a generous and responsible thing. We will take up the challenge."