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* Martial arts epic "The Grandmaster" kicks off Berlin
* Film festival tackles hot topic issues
* Matt Damon, Anne Hathaway among stars on red carpet
By Mike Collett-White
BERLIN, Feb 7 (Reuters) - The 2013 Berlin film festival kicks off on Thursday with "The Grandmaster", a martial arts epic from Hong Kong director Wong Kar Wai who is also presiding over this year's jury.
The 11-day stretch of screenings, photocalls, interviews and parties will showcase hundreds of movies, with much of the focus on 19 entries in the main competition and a handful of star-studded U.S. titles.
Matt Damon, Anne Hathaway and Nicolas Cage are expected on the red carpet in Berlin, as are European heavyweights Catherine Deneuve and Jude Law as well as Asian stars including Tony Leung Chiu Wai and Zhang Ziyi.
The annual Berlinale, now in its 63rd year, is one of Europe's most important film festivals, and alongside it runs a large-scale market where new features and documentaries are bought, sold and financed.
While unable to match the glamour of Cannes or star power of Toronto, Berlin is an early introduction each year to what global cinema has to offer and enjoys a reputation for tough films tackling hot topic issues.
This year Damon stars in "Promised Land", about the controversial drilling technique for extracting gas known as "fracking" directed by his "Good Will Hunting" collaborator Gus Van Sant.
Steven Soderbergh's "Side Effects" is in part a critique of the pharmaceutical industry and boasts Law, Channing Tatum and Catherine Zeta-Jones in the cast.
Soderbergh, an Oscar winner for his 2000 narcotics drama "Traffic", has announced it will be his final big-screen feature film, at least for the foreseeable future.
One of the most eagerly awaited pictures at the festival promises to be "Closed Curtain", co-directed by acclaimed Iranian director Jafar Panahi who made it in defiance of a 20-year ban on film making imposed by authorities at home.
Convicted of making anti-government propaganda, Panahi has nevertheless managed to make two movies since being placed under house arrest in 2010.
In 2011 "This Is Not a Film", about a day in his life, was transported out of Iran on a USB stick hidden inside a cake, and has since been shown to the world.
Eastern Europe is well represented, with six of 19 competition entries either made or based behind the old Iron Curtain including "Child's Pose" from Romania and Bosnian entry "An Episode in the Life of an Iron Picker".
Out of competition is 3D prehistoric animation comedy "The Croods", featuring the voices of Nicolas Cage and Ryan Reynolds, and "Dark Blood", which River Phoenix was filming when he died aged 23 in 1993.
Nearly 20 years later, after saving the footage from being destroyed, director George Sluizer decided to finish the film by reading aloud off-screen the missing scenes from the screenplay. (Reporting by Mike Collett-White, editing by Paul Casciato)