Finnish PM-elect sees no big change to Portugal bailout

Reuters News
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Posted: Apr 19, 2011 8:19 AM
Finnish PM-elect sees no big change to Portugal bailout

By Jussi Rosendahl and Terhi Kinnunen

HELSINKI (Reuters) - Finland's likely next prime minister ruled out proposing major changes to a bailout package for Portugal, seeking to soothe concerns that its new government could block the European Union's plans and upset markets.

Finland's parliament, unlike others in the euro zone, has the right to vote on EU requests for bailout funds. Strong gains by the anti-euro True Finns, which came third in Sunday's vote, has raised concerns it could hold up plans to shore up Portugal.

And the Social Democrats, the main opposition party which may join the government after coming second, said on Tuesday it wanted private investors to shoulder more liability in the EU's bailout plans, despite broadly supporting them.

Timo Soini, the leader of the True Finns, has said he expects the EU to change its plans for a bailout of Portugal -- underlining the difficulties in agreeing over Portugal and forming a majority government.

But National Coalition party leader Jyrki Katainen, in charge of forming the government, said Finland must remain "responsible" and there was little chance a meeting of European finance ministers would accommodate changes to the bailout.

Asked what changes Finland might propose at the Ecofin meeting in mid-May, Katainen told reporters: "We'll see what is possible, but anyway, the changes would not be very big."

Either the incumbent government or the one Katainen hopes to lead will Portugal's bailout into parliamentary vote.

"Finland must, for its own good, create a smart and responsible government program, which maximizes our influence in all international forums. I'm convinced we can find such a policy," Katainen said.

The party leader added he considered Portugal aid as "essential" for economical stability.

"The (government's) stance must be such that Finland is to solve problems and not creating new ones. But I can't say yet how that will be done," he said on the sidelines of a party meeting.

In what could be seen as a signal to the True Finns, Katainen said all parties that joined the next coalition would need to back the government's program.

"I believe that all the parties that join the government will also (have to) back that government. We can't think that we would form a government where a significant part would not back it."

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Katainen said he expected the other three parties in the incumbent government -- Center party, Greens and Swedish People's Party --- to vote in favor of the Portugal bailout package.

The Center and Green parties have said they will likely be in the opposition, while it's unclear what the Swedish People's party will do.

Katainen has said the most likely base for the new government would include the National Coalition, the True Finns and the Social Democrats.

The Social Democrats support the EU. But party leader Jutta Urpilainen repeated its demands that private investors should be held more accountable in EU bailout plans.

"We see that we need common tools to solve this crisis, but it is necessary that also banks and investors participate in solving the crisis," she told reporters.

Analysts say a majority government requires significant compromises from the diverse parties.

"The government talks will be tough. The National Coalition party and ... the True Finns, have, on many issues, opposite opinions and values," said Ville Pernaa, director for parliamentary studies at Turku University.

Sixten Korkman, managing director for the Research Institute of the Finnish Economy, said it was hard to predict how the parties would come to an agreement in the Portugal package.

"Soini took a particularly tough line on this during the election campaign so it must be difficult for him to walk away from this issue, and many people in his party would have great difficulties in accepting."

Katainen said he was prepared for a long, drawn-out process.

The True Finns won 19.0 percent of the vote in the election, securing 39 of parliament's 200 seats, up from five in 2007. The National Coalition, which won with 20.4 percent, has 44 seats while the Social Democrats, on 19.1 percent, have 42 seats.

(Additional reporting by John Acher; Writing by Ritsuko Ando; Editing by Alison Williams)