UPDATE 2-Finnish party hardens opposition to Portugal aid

Mon May 2, 2011 1:33pm EDT

Related Topics

* True Finns say still opposed to a Portuguese bailout

* Parliament, which must vote on aid, could still back plan

* Move could also give room for govt without True Finns

* True Finns, SDP both say ready to start coalition talks

(Adds quotes, analyst comment)

By Jussi Rosendahl

HELSINKI, May 2 (Reuters) - The eurosceptic True Finns party took a hardline stance on Monday against a bailout for Portugal, dousing speculation it might soften its position on the eve of talks this week to form a new government.

The comments, which followed indications that the True Finns might be more open to helping the stricken euro zone member, were a setback for prime-minister-in-waiting Jyrki Katainen, who is trying to cobble together a broad agreement on the plan.

The move means Katainen, whose National Coalition won the most seats in last month's vote, will need to rely on other parties to sign up for the Portugal plan. But it also could give him room to form a governement without the True Finns.

"It sounds like the True Finns are disqualifying themselves from the government," said Sixten Korkman, head of The Research Institute of the Finnish Economy.

"The question is so fundamental for Finland that there can't be two stances in the government for it."

Finland's parliament, unlike others in the euro zone, has the right to vote on European Union requests for bailout funds, opening the possibility that it might block Portugal's rescue.

The rise of the previously obscure True Finns, who came third in elections last month, has underlined how unpopular the bailout issue is in Finland. As a result, Katainen has had no choice politically but to seek accommodation with the party. But the True Finns restated its hostility to helping Lisbon with the current temporary EU bailout fund and to the creation of a permanent European rescue mechanism from 2013.

"Such a solution (on Portugal and stability mechanisms) that could work for us cannot be found with the current assumptions," party leader Timo Soini told a news conference.

"We will not support or vote in support of these solutions, because we do not believe in these systems."

TOUGHER TALKS

Many analysts had thought both sides could come up with a face-saving solution, one that allowed the True Finns to join the government with cosmetic changes to the bailout plan.

"This was a surprise answer," said Kimmo Gronlund, a research director in Abo University. "I was expecting them to be more conciliatory."

Gronlund said Katainen could still try to form a government with the True Finns and the Social Democratic Party (SDP), but it looked difficult now. The SDP, which came in second, has yet to spell out a final position on Portugal.

Portugal became last month the third euro zone country to seek foreign aid following Greece and Ireland. European Commission and IMF officials are discussing how to help Lisbon.

An early agreement on Portugal is crucial as European finance ministers discuss help for Lisbon as soon as in mid-May.

Katainen said last Friday that Finland had only a few days to decide whether to back aid for Portugal. [ID:nLDE73S1PE]

The SDP has also been critical of aid for Portugal, arguing the burden for any assistance must be extended to include the private sector.

"Our stance has not changed... Portugal's package must include liability for banks and investors," SDP leader Jutta Urpilainen told Reuters. (Writing by Terhi Kinnunen and Adam Cox; editing by David Stamp and Ralph Boulton)

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