Finland's Social Democrats oust finance minister Urpilainen

SEINAJOKI, Finland Fri May 9, 2014 7:20am EDT

Jutta Urpilainen, the SDP (Social Democrats) party leader and Finance Minister, reacts at the party's reception in Helsinki October 28, 2012 after the Finns went to the polls in local elections. REUTERS/Vesa Moilanen/Lehtikuva

Jutta Urpilainen, the SDP (Social Democrats) party leader and Finance Minister, reacts at the party's reception in Helsinki October 28, 2012 after the Finns went to the polls in local elections.

Credit: Reuters/Vesa Moilanen/Lehtikuva

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SEINAJOKI, Finland (Reuters) - Finnish Social Democrats on Friday narrowly voted to replace their leader and finance minister Jutta Urpilainen with a more leftist candidate in a move that could complicate government efforts to curb debt.

51-year-old Antti Rinne, a critic of the government's austerity measures, has in recent years led the country's biggest white-collar workers union Pro and is known for feisty negotiation tactics, as well as favoring state-led economic growth.

Rinne received 257 votes in the party congress election against 243 votes for Urpilainen, who had said that losing the leadership would also see her step down as finance minister.

Rinne said he could take over the role but said the decision is up to party council, which is due to discuss the issue in the coming weeks.

The biggest of the ruling parties, the conservative National Coalition, is also due to get a new leader next month, who will then become the prime minister. Rinne said the two changes provide a chance to revise government's plans for its final year in the office.

"The SDP's policy will change to emphasize economic growth and employment," he said in a news conference after the vote.

"We will revise some policy stances to seek a new boost for the economy."

Rinne added he would seek to replace already agreed austerity measures with new stimulus, setting up a conflict with the conservatives who have emphasized the need to curb public borrowing.

UNION LINK

The government has during its term agreed to cut public spending and implement tax hikes worth around 7 billion euros ($9.7 billion), and outlined long-term plans to reform healthcare and social welfare.

Credit rating agency Standard & Poor's last month noted political risks in implementing the steps, cutting its outlook on Finland's triple-A credit rating to negative.

Finland is one of only a handful of countries in the euro zone with the top rating, but weak European demand has hit its exports, employment rate and consumption, triggering a two-year recession.

Finland's debt-to-GDP ratio is seen reaching the EU limit of 60 percent this year, with an unemployment rising to 8.4 percent.

Since Urpilainen took the party helm in 2008, support for the Social Democrats, the second-biggest party in parliament, has fallen from 21 to 15.5 percent, weakening its chances of retaining Cabinet posts after the general election next year.

Rinne's supporters accused Urpilainen of doing too little to protect jobs and not looking harder at avoiding some spending cuts.

"The mood is very bad towards the SDP in the factory halls. The party is leaning too much to the right. We will need the labor unions and the party to be hand in hand again," said Timo Suhonen, a paper mill worker from central Finland.

Urpilainen was known for taking a hard line on euro zone bailouts and demanding collateral for loans, but Rinne has instead said he would cut interest and lengthen maturities on Greece's loans to help the troubled economy grow.

He has also said he favors changing the European Central Bank's mandate to allow it to directly buy government bonds to moderate debt yields. He would also add employment and growth as a new ECB monetary policy target.

($1 = 0.7214 Euros)

(Reporting By Jussi Rosendahl Editing by Jeremy Gaunt)

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