(Updates compensation details, fires)

By Karolos Grohmann

PYRGOS, Greece, Aug 30 (Reuters) - Greek villages on Thursday started burying relatives killed by forest fires that were still burning parts of the country for a sixth day as thousands rushed to collect damage compensation from banks.

Police arrested 15 people suspected of fraudulently claiming the immediate 3,000 euros ($4,000) payment the government was handing out in the affected areas to try to show it was providing fast relief for the fires that have killed 63 people.

Less than three weeks before a parliamentary election, critics accused the conservative government of responding chaotically to the fires and said its compensation system was open to widespread fraud and offended people's dignity.

"This is far too easy and far too chaotic," said Gerasimos Paraskevopoulos, mayor of the town of Pyrgos in the southern Peloponnese, where hundreds crowded outside a bank. "The money should be distributed by local councils who know their citizens."

Some people admitted they had come from as far away as Athens and Thessaloniki, about 600 km (370 miles) north.

"Hundreds of Gypsies have come here who don't live here," said Gerasimos Halilopoulos, a Roma from Pyrgos, told Reuters. "It is making my life difficult because I need the money."

The system required filling out a simple form, to be checked later, to claim the cash and Prime Minister Costas Karamanlis said the simplified system was the right thing.

"The order is 'move fast', without any delay. We're removing bureaucratic hurdles. Nothing should stand in the way of us doing our duty," he told a news briefing.

ELECTIONS AHEAD

Karamanlis's handling of the crisis could be crucial for his hopes for re-election on Sept. 16. In two days, 72.4 million euros were handed to about 20,000 people, the government said.

A cartoon in the centre-right newspaper Kathimerini showed a helicopter flying over scorched countryside dropping banknotes from a water bucket while the pilot says: "Yes prime minister, as agreed, we're dropping 100-euro bills so the land will turn green again."

Vast swaths of countryside have been burned and more than 500 homes were razed in what have been Europe's most extensive wildfires in a decade, according to the European Space Agency.

In the village of Anilio, hundreds gathered to bury a forest warden killed trying to save a mother and her four children from the flames, only five days after he began the job. The woman was found dead, the bodies of her children in her arms.

On Thursday 24 fires raged on, mainly in the western Peloponnese and the island of Evia, north of Athens, the fire brigade said.

The government said the fires would cost Greece at least 1.2 billion euros ($1.6 billion) but would not derail efforts to cut the budget. Athens said it planned to seek European Union emergency aid.

European Commission President Jose Manuel Barroso said Greece would not be left alone in its hour of need.

"This is also a European disaster," he said in a statement. "At this sad time it is good to stress that solidarity is at the heart of European vision."

Foreign Minister Dora Bakoyanni thanked foreign ambassadors in Athens for their countries' firefighting help and said Greece would make sure Ancient Olympia, the birthplace of the Olympic Games, which was licked by the flames, would be fully restored.

The government has said arsonists started the fires and most Greeks believe rogue developers are burning forests to make way for new construction.

"We are determined that not the smallest piece of land will not be reforested. Nobody will build on burnt land," Bakoyanni said.

(Additional reporting by Robin Pomeroy and Michele Kambas)

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