STOCKHOLM, Dec 18 (Reuters) - There is no reason to reopen an investigation into the unsolved 1986 murder of Swedish Prime Minister Olof Palme, a prosecutor said on Thursday, after finding there was insufficient evidence against a man who had been regarded as the chief suspect.
Palme was shot dead as he walked along a street in central Stockholm after visiting the cinema with his wife and son, sparking the biggest man hunt in Sweden's history and countless conspiracy theories.
Five years ago, the prosecutor in charge of the case named Stig Engstrom, a graphic designer who died in 2000, as the chief suspect. A journalist in September requested the case should be reopened, citing new forensic skills that could be applied.
"The evidence is not sufficient to identify him as the perpetrator," senior prosecutor Lennart Gune told reporters.
He said the case, which has fascinated and horrified Swedes for four decades, would remain closed.
"There is no basis that I know of today which could allow a reopened investigation to bring a charge or lead to a verdict," Gune said.
Palme was the dominant figure in Swedish politics in the 1970s and 1980s, helping to define the image of modern Sweden as much as IKEA furniture and Volvo cars.
In foreign policy he took a vocal stand against the Vietnam war and supported anti-colonial movements around the world. At home, he was one of the main architects of Sweden's welfare state.
The failure of the police to find to his killer has left a scar on Sweden's national psyche and given life to dozens of conspiracy theories about the likely perpetrators, with the list including the CIA and right-wing extremists within the Swedish state itself.
One man, a violent petty criminal, was convicted of Palme's murder in 1989 only to be released on appeal the following year. He died in 2004.
(Reporting by Simon Johnson; editing by Barbara Lewis)