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HELSINKI (Reuters) - Finland's Left Alliance will quit the government after opposing cuts to welfare spending in the budget, the party's leader said on Tuesday, but the ruling coalition will retain a parliamentary majority.
The five other parties in the coalition government have accepted the budget and together have 112 seats in the 200-strong parliament. The Left Alliance holds 12 seats.
"The prime minister told us we cannot continue in the government if we don't accept cuts to unemployment benefits, to child welfare, to the sick, to pensioners," Left Alliance chief and Culture Minister Paavo Arhinmaki told reporters.
"We will hand in our resignation letters from the government later this week," Arhinmaki said.
Details of the budget have not been made public after two days of coalition talks on spending and taxation plans for the next three years. Finnish media has reported that it includes cuts to child benefits and an increase in capital gains tax.
Conservative Prime Minister Jyrki Katainen said: "Finland's situation is so challenging that someone has to make decisions even if they are difficult. The Left Alliance has chosen not to be there when decisions are made and will leave the government."
The Finnish economy shrank in 2012 and 2013 and there are fears that the Crimea crisis could dampen the expected recovery, increasing pressure on the government to cut spending in order to reduce the budget deficit which amounted to 2.0 percent of gross domestic product last year.
Europe's downturn has weighed on exports from Finland's machinery and paper industries, and Nokia's loss of dominance of the global mobile-phone market has exacerbated the economic decline.
On the government's spending plans, Katainen told reporters: "There is no one in Finland who would not have to participate" in the budget squeeze.
Reporting by Sakari Suoninen; Editing by Janet Lawrence