Updates with Adams statement in paragraph 3 and 4

By Nathan Layne

NEW YORK, Feb 11 (Reuters) - New York Mayor Eric Adams may soon be free of the criminal case that had cast a shadow over his administration. But the reputational damage of being charged with corruption could hamper his reelection campaign, political analysts say.

On Monday, the Justice Department directed federal prosecutors in New York to drop their five-count indictment against him, in which he was accused of accepting illegal campaign donations in exchange for political favors.

Adams, who had pleaded not guilty and was set to face trial in April, applauded the department in a livestreamed address on Tuesday for ending what he called "an unnecessary ordeal."

"I thank the Justice Department for its honesty," Adams said. "Now, we can put this cruel episode behind us and focus entirely on the future of our city. It's time to move forward."

The development followed a months-long effort by Adams, a Democrat, to forge closer ties with Republican President Donald Trump, fueling speculation that he might be trying to secure a pardon. Adams visited Trump at his Mar-a-Lago resort in Florida on January 17, three days before his inauguration, though he denied discussing his legal troubles or ever seeking a pardon.

While likely free of the criminal case for now, the public airing of criminal allegations could carry a significant political cost. A number of Democrats have emerged to contest the party primary in June, the winner of which is likely to win the November general election to lead the left-leaning city.

A poll of likely primary voters taken last month by opinion research firm Bold Decision found that 73% held an "unfavorable" view towards Adams, with worries about crime on the subway among the factors behind their dissatisfaction.

"New Yorkers are just very unhappy with the state of affairs in the city itself, and this goes beyond any legal problems," said Patrick Egan, a political science professor at New York University. "Something would really have to change, in addition to having these charges dropped, for him to become a really strong and viable candidate for reelection."

Among Adams' challengers are five self-described progressives: State Senator Zellnor Myrie; Brad Lander, the city comptroller; State Senator Jessica Ramos; State Assemblyman Zohran Mamdani; and former comptroller Scott Stringer.

But perhaps Adams' biggest threat comes from former Governor Andrew Cuomo, who has not declared his candidacy but is looking at entering the race, according to a person familiar with his thinking. Cuomo, who resigned in 2021 due to a series of sexual harassment allegations he denies, enjoys wide name recognition and occupies the same center-left political space as Adams.

Cuomo was selected first by 35% of respondents in a poll by the Honan Strategy Group, ahead of Lander at 10% and Adams and Mamdani at 9%. Conducted January 23-26, the poll found crime, quality of life, and affordability to be top issues for voters.

Last year the Justice Department agreed with a finding by the New York attorney general that Cuomo violated federal law by sexually harassing female employees and reached a settlement with the state of New York for a series of reforms to protect women in the workplace. He was never charged with a crime and has denied any wrongdoing.

NOT EXONERATED

Prosecutors in the U.S. Attorney's office in Manhattan have yet to comment on whether they intend to follow the Justice Department's directive on Adams, and any move to drop the indictment would need to be reviewed by a judge.

The Justice Department's directive also does not appear to fully wipe the slate clean for Adams. In a memo sent to the Manhattan prosecutors, Acting Deputy Attorney General Emil Bove said he was not questioning the integrity of their work and that the case could be reviewed again after the mayoral race.

But Bove ordered that no additional "investigative steps" should be taken until after the November election. He also appeared to endorse Adams' assertion that he was prosecuted for political reasons and said the case was distracting the mayor from supporting the federal government on immigration.

Christina Greer, an associate professor of political science at Fordham University, says any polling at this juncture should not be given too much weight and believes that Adams still has a chance to regain the support he needs to survive the primary.

"In politics you are not dead until you are literally dead, so Eric Adams is still very much in this," Greer said.

Greer noted that Adams still retains the support of the Hasidic community and other key members of the coalition that elected him in 2021, and predicted he would have some success portraying the progressive candidates as radicals to his left.

Greer is also skeptical of Cuomo's chances, saying that the city is split over his handling of the COVID-19 pandemic and that the sexual harassment allegations could hurt him as well once revisited by his opponents during a primary campaign.

Adams could also make the case to voters that he would have a working relationship with Trump and contrast that with Cuomo, a frequent critic of the president, and others in the race, Greer said.

(reporting by Nathan Layne; editing by Paul Thomasch and Claudia Parsons)

((nathan.layne@thomsonreuters.com; +1 312 485 5116 ;))