By Lefteris Papadimas and Deepa Babington
ATHENS (Reuters) - Former Greek Prime Minister George Papandreou says his newly-formed party is open to an alliance with election frontrunner Syriza as long as it agrees to hold a referendum on reform policies after Sunday's election.
Sidelined since being ousted as premier in 2011, the third-generation scion of Greece's most prominent political dynasty is attempting a comeback after splitting three weeks ago from the PASOK party founded by his father Andreas four decades ago.
The fledgling party is being closely watched as a wild card that will splinter the leftist vote in the Jan. 25 election and play a role in shaping the post-electoral landscape if it crosses the 3 percent share of vote hurdle to enter parliament.
With a firmly pro-euro and pro-reforms platform, Papandreou could be a moderating influence on Syriza, whose radical leftist rhetoric and pledge to overturn reforms has spooked investors.
Syriza leader Alexis Tsipras has ruled out alliances with anyone apart from the Communist party, but analysts expect him to soften that stance if he fails to win outright.
Most polls show Papandreou's "Movement of Democratic Socialists" just below the threshold to enter parliament, but the former premier said he was confident it would get in.
His aim, he said was to shift the debate in Greece away from a narrow focus on support or opposition to its tough bailout programme. "It's not about the deeper issues we have in our country or the changes we need to make and I want to bring that back in the debate," he told Reuters in an interview on Monday.
He ruled out an alliance with the ruling New Democracy party, saying Prime Minister Antonis Samaras - his roommate in the early 1970s at Boston's Amherst College - had failed to implement reforms or stand up to special interest lobbies.
But he said he was willing to cooperate with the anti-bailout Syriza party if it respected certain conditions like a popular referendum.
"It fully depends on what SYRIZA would espouse," he said. "If they are serious about making changes, if they are serious in negotiating with partners in an organised and stable way to move out of this particularly difficult period, out of the memorandum (bailout) to the markets, I would be glad to support."
GREEK MYTHOLOGY
Papandreou made an ignominious exit from the prime minister's seat in 2011 after a botched attempt at a separate referendum on the unpopular 240-billion-euro bailout that panicked markets and pushed Greece back to the centre of a new euro zone crisis.
Conditions had changed since then, he said, adding that a referendum was essential for a government to secure the mandate to implement difficult reform policies and offer a guarantee to lenders of the popular will. It was time Greece stopped blaming outsiders - like the EU/IMF "troika" imposing austerity in return for financing - for its problems, he said.
"We have to take ownership of Greece," he said.
Firmly in favour of keeping Greece in the euro zone, Papandreou also called on Europe to reduce Greece's debtload and said it was time to end austerity.
Papandreou could affect the electoral arithmetic even if he failed to make it to parliament. Under Greek electoral law, the more votes won by parties that fail to make it to parliament, the greater the share of seats given the biggest party.
Accused by former PASOK members of betraying the party set up by his father, Papandreou said he wanted to establish a group with new values and identity after the party he led to power in 2009 became "subsumed", he said, with clientelism.
"That's not my politics, that never was my politics," he said. "I don't need to be in politics just to be a deputy - we have great islands here in Greece. I could go off to a Greek island to play my guitar."
(Editing by Philippa Fletcher)
