(Adds prime minister quote, opinion polls)

By Karolos Grohmann

KATO SAMIKO, Greece, Aug 31 (Reuters) - Planes dropped water on smouldering forest fires in Greece on Friday and the European Union promised cash to help the country recover from more than a week of destructive blazes that killed 63 people.

Firefighters were tackling fires on two main fronts, and help began to arrive for the thousands made homeless, while the finance ministry said the damage to the overall economy was likely to be small.

Prefabricated homes were being delivered at the pace of 40 a day, often hauled up winding mountain paths to re-house country dwellers whose homes had been razed.

The government has paid out more than 70 million euros ($96 million) to more than 20,000 people whose properties were destroyed. The Finance Ministry has said the fires will cost the economy at least 1.2 billion euros but Greek media have estimated the bill at something like 4 billion euros.

The EU official in charge of a 1 billion euro relief fund promised to help after viewing the scorched valleys of the southern Peloponnese peninsula from a helicopter.

"If the damage is worth, as you write in the newspapers, 4 billion euros, and I hope it will be a lot lower, that will mean 200 million from the solidarity fund," EU Regional Policy Commissioner Danuta Huebner told reporters after meeting Prime Minister Costas Karamanlis in Athens.

EU Commission President Jose Manuel Barroso, who has called the fires a "European disaster", was due to fly to Greece later on Friday to hold talks with the government.

ELECTIONS LOOM

Just two weeks before a parliamentary election, Karamanlis has come under severe criticism for his conservative administration's handling of Greece's worst fires in memory and voters will watch his management of the relief effort closely.

"This battle is not yet over, but the situation is better," he said. "We are coordinating and acting effectively to heal the wounds, at least the ones that are direct and more demanding."

Before the fires, the ruling New Democracy party was ahead of the opposition socialists by 1 to 2 percentage points in the opinion polls. Since then, both main parties have lost support and the winner may have to form a coalition government.

On the Peloponnese, where large areas of once lush countryside are now blackened earth dotted with charred tree stumps, life was slowly returning to something like normal.

Roads were re-opened and electricity was restored to most of the 425 villages which had been cut off.

"What was it if it wasn't deliberate? I'm just relieved the worst of it is over," said taxi driver Georgios Tsevelekos, 58, in the town of Megalopoli, reflecting suspicions voiced by government leaders that the fires were started by arsonists.

"The people who have done this should be thrown into the pyre. That'll teach others," he said.

While communities were devastated and livelihoods destroyed, especially in the Peloponnese, the finance ministry said the fires would not have a big impact on the economy as a whole.

The five affected prefectures account for only 4.5 percent of national GDP and 12 percent of farm output, it said. Big earners like manufacturing, construction and services were not directly affected.

"As a result, the impact on the country's total GDP and on the economy's annual growth rate is seen as negligible in the short term," the ministry said.

The national weather service predicted a mini-heatwave in the Athens region on Saturday but also the prospect of rain in some parts of the country, reducing the risk of new flare-ups. (Additional reporting by Michele Kambas and Dina Kyriakidou)

AlertNet news is provided by