UPDATE 3-True Finns see Portugal bailout opposition growing

Wed Apr 20, 2011 2:33pm EDT

* Soini: Ecofin meeting may face "entirely new" solution

* Outgoing PM: bailout too big an issue for caretaker govt

* True Finns' Soini: caretaker govt cannot avoid its duty

(Adds comments from True Finn leader, analyst, voters)

By John Acher

HELSINKI, April 20 (Reuters) - The head of the eurosceptic True Finns party, confident his opposition to the terms of a Portuguese bailout was gaining traction, said on Wednesday euro zone members might face a new solution to the debt crisis by next month.

"I believe that reason will return to Europe," said Timo Soini, the charismatic leader of the party which scored big gains in weekend elections by promising to block the looming European bailout for Portugal.

His confidence also shows how hard it will be for the National Coalition party, which won the most votes on Sunday, to form a coalition with the True Finns and the opposition Social Democrats, who finished second.

Forming alliances to secure a parliamentary majority is crucial for National Coalition leader Jyrki Katainen -- the likely next prime minister -- because in Finland, unlike other euro zone countries, parliament approves requests for EU bailout funds.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Finland headed for face-saving bailout fudge [ID:nLDE73I0I1]

True Finns seen in govt, Finland to back bailout[nLDE73J0U1]

How Finland's next coalition govt will be formed[nLDE73I13V]

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

While Katainen has promised to form a government that supports the present bailout plan, long negotiations over a new government may delay agreement on aid for Portugal, a topic European finance ministers will tackle on May 16.

Soini told reporters attitudes to the debt crisis were changing, with many across Europe, including in Germany, unhappy about having to help countries that have mismanaged their finances.

"Things seem to be changing every day," he said. "What is on offer at the Ecofin on May 16 could be entirely different from the current situation, or maybe we will go back to square 1."

He said the best solution to the European debt crisis would be to require banks to recapitalise and bear more of the liability for debts, as he had suggested during his campaign.

POSSIBLE DELAYS

Disagreements over how to help Portugal mean coalition talks are likely to be difficult and lengthyand the Finnish position may still be undecided when finance ministers meet on May 16.

Of the three main parties likely to discuss a coalition, the True Finns are the most critical of the EU bailout plans. Soini said he would not set absolute conditions for joining a new coalition, but he stuck to his opposition to the present Portugal bailout plan.

The Social Democrats support EU policies in general, but do not like the way the Portugal rescue plan is financed and are demanding that private investors shoulder more liability.

Social Democrat leader Jutta Urpilainen, in an interview with the daily Helsingin Sanomat, reaffirmed that her party could accept the EU bailout plan with conditions.

Analysts doubted the process would be smooth.

"It is quite likely that forming the new Finnish government will take a long time. Europe may have to decide on these mechanisms before Finland has a new government," said Sami Borg, director of Finnish Social Science Data Archive.

Adding to such worries, outgoing prime minister Mari Kiviniemi said it was up to the next government to put the Portugal bailout plan to parliament.

At the earliest, a new government will be appointed on May 19 and go through a vote of confidence on May 20 or 24, a National Coalition official said.

COMPROMISES AND DISCONTENT

Analysts say Katainen's solution will likely be a mix of compromises and face-saving measures, such as offering cosmetic concessions on European finance and handing some key cabinet jobs to the True Finns in exchange for letting the Portugal vote pass in parliament.

Some say the new government is likely to take a slightly tougher stance against Brussels to heed voter discontent.

The True Finns' tough line against bailouts has resonated among many voters who feel their famously high taxes are helping to bail out irresponsible governments, while they struggle with high unemployment.

In Helsinki, voters' views were mixed, some saying the outgoing government was out of touch with the concerns of ordinary citizens and some worried that Finland was leaving its pro-Europe, internationalist course.

"It is a difficult question," said Veikko Haajanen, a pensioner who voted for the Social Democrats, when asked about Portugal aid. "If we don't help, how will it affect the euro, and what kind of backlash will it have on Finland?"

Officials from the European Commission, the European Central Bank and the International Monetary Fund are discussing terms of an assistance programme with Portugal's caretaker government.

Under the existing rules, funding for the expected 80 billion euro package would come roughly one-third from the IMF and two-thirds from the EFSF and a smaller fund managed by the European Commission.

Finland is one of only six AAA-rated sovereign states in the 17-nation euro zone and its participation in EFSF is considered politically vital and financially awkward to replace. (Additional reporting by Terhi Kinnunen; Writing by Ritsuko Ando; editing by Tim Pearce)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.