* Government says early election risks stability
* U.S. adds weight to calls for poll by end of year
By Alain Iloniaina
ANTANANARIVO, April 22 (Reuters) - Madagascar’s government said on Wednesday it was not afraid to hold presidential elections this year but more time was needed to create a stable democracy.
Andry Rajoelina, who took power after Marc Ravalomanana stepped down under pressure from the army, has promised a poll in October 2010.
But neighbouring states and foreign leaders have said that is too late to resolve the island’s political crisis which claimed 135 lives and damaged the island’s $390 million-a-year tourism sector prior to Ravalomanana’s departure.
Prime Minister Roindefo Monja said it would be imprudent to hold the next presidential vote before drawing up a new electoral code.
His comments came in reaction to a local media interview with the U.S. ambassador to the Indian Ocean island, who joined calls for a ballot before the end of 2009.
"We could even hold elections today. The interim administration is not afraid to do so but we need to put in place something long-lasting. Before organising elections we will draw up a new electoral code," Monja told reporters.
U.S. envoy Niels Marquardt told La Verite newspaper that a worrying "climate of insecurity" prevailed in Madagascar. He said he received daily reports of threats against Ravalomanana loyalists, journalists and people on the streets.
Tensions have escalated in the capital Antananarivo this week after two people died in clashes between security forces and anti-government supporters on Monday prompting a government ban on public protest.
Marquardt told the paper a joint United Nations, Southern African Development Community (SADC) and African Union (AU) mission would look at the feasibility of an early election.
"It is in the interest of Madagascar to hold a presidential election before the end of this year because, if there is no decision before then, we fear Madagascar’s eligibility within the African Growth and Opportunity Act (trade agreement) risks being compromised," he was quoted as saying.
He said Ravalomanana’s overthrow was a coup and his country would neither recognise nor work with Rajoelina’s government.
Earlier on Wednesday, lawyers for Ravalomanana asked a court to unblock his bank accounts and those of his wife, as well as those relating to his Tiko business empire.
Before he quit power, critics accused Ravalomanana, a self-made millionaire who started off hawking yoghurt from a bicycle, of monopolising business and evading taxes.
Rajoelina’s government froze the accounts last week claiming the Tiko conglomerate owed tens of millions of dollars.
"The interim government’s finance minister demanded the freezing of these accounts. He said the reason was the non-payment of taxes by Tiko which he alleged amounted to 30 billion ariary ($16 million)," said lawyer Hasina Andriamadison.
He told Reuters that no evidence as yet had been put forward to support the allegation.
Ravalomanana, 59, now in exile in southern Africa, has indicated he will return to the world’s fourth largest island within weeks and is willing to share power. (Writing by Richard Lough; Editing by Giles Elgood)