The government insisted yesterday that it had no prior knowledge of the dispute between former Aegean Minister Aristoteles Pavlidis and a shipowner, as pressure grew on Prime Minister Costas Karamanlis to take action over the blackmail allegations.

Sources in Karamanlis’s office said that they only became aware of the issue last April when Pavlidis filed a suit against the owner of SAOS Ferries Fotis Manousis over claims that he paid 1 million euros annually in order to secure state subsidies to run ferry services to remote islands.

Pavlidis accused Manousis of pressuring him to provide one of his ships with a permit to ply one of the lines to remote islands, saying he was the victim of blackmail.

Leaked extracts of the case documents indicate that Manousis’s former aide had recorded the numbers of checks worth 650,000 euros, which were allegedly intended as payments to Pavlidis. The checks were never cashed.

Last week, prosecutor Isidoros Doyiakos, following a preliminary investigation, charged Pavlidis’s assistant Panayiotis Zachariou with blackmail.

The steady stream of revelations about the case are making the prime minister’s position increasingly uncomfortable as several MPs believe that he should take action to remove Pavlidis before the party as a whole is tarnished.

“There is a very serious problem that our party must confront,” said Dodecanese MP Anastasios Karamarios yesterday.

On his part, Pavlidis said that distorted details of the case were being leaked to the press “to complete the disgraceful behavior of Manousis”. The ex-minister said that justice would vindicate him.