Reuters International

Designated Austrian Chancellor Christian Kern of the Social Democratic Party (SPOe) speaks during a news conference in Vienna, Austria, May 17, 2016. REUTERS/Heinz-Peter Bader

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By Michael Shields and Alexandra Schwarz-Goerlich

VIENNA (Reuters) - Austria's new chancellor said on Tuesday his Social Democrats (SPO) prefer to keep governing with conservatives and will not sell their souls just to remain in power, but he did not rule out joining forces one day with the far-right Freedom Party (FPO).

"Let's cross that river when we come to it," Christian Kern told his first news conference since being named chancellor last week, saying the SPO's long-standing ban on governing with the anti-Islam, eurosceptic FPO at national level was "obsolete".

The 50-year-old outgoing head of Austria's state railway was sworn in later on Tuesday with the SPO united behind him to succeed Werner Faymann, who resigned on May 9 after the SPO's humiliating showing in presidential elections.

The SPO heads a coalition with the conservative People's Party (OVP), and Kern underlined that the two, which have dominated post-1945 politics in Austria, needed to tackle governing malaise that has boosted the FPO's appeal.

"At the end of the day we need an identity and for us it is absolutely unimaginable to work with parties who incite against people and minorities," Kern told journalists.

When asked in an interview with broadcaster ORF whether the FPO was such a party, Kern said he currently did not view the FPO as a potential coalition partner on the national level due to their "rhetoric escalation".

"It's a long way to go before we could think about joining forces," Kern said.

The ruling coalition has at times looked dysfunctional because of SPO-OVP feuding over policy including finances and education, and analysts have said they would have to find ways to work better together until 2018 or face an early parliamentary election the FPO was likely to win, given its current lead in opinion polls.

Buoyed by public anger over the European Union's struggle to come to grips with the migrant crisis, the FPO candidate stormed to the lead in presidential elections last month, with the decisive run-off scheduled for Sunday.

"If we don't get it that this is our last chance, the two big parties are going to disappear," said Kern, who grew up in a working class district of the capital Vienna and had never before held elected office.

TOUGH ASYLUM POLICIES

Kern, a former executive at power group Verbund, will have to negotiate with OVP leader Reinhold Mitterlehner, who has made keeping the coalition's tough line on immigration a condition for the centrist coalition government to survive.

Kern suggested no big changes in policy towards the influx of migrants that has tested SPO unity, including capping the number of asylum requests Austria accepts this year at 37,500, which has been widely criticised by rights groups.

The SPO has broadly come around to the OVP demand for a harder line on immigration in a bid to outflank the FPO and Kern told broadcaster ORF he stood by the coalition's asylum policies.

Kern made a name for himself as an effective manager when tens of thousands of migrants poured into Austria from Hungary in September. His train stations were converted into refugee shelters and aid distribution centres for weeks.

Whereas countries before Austria on the main migrant route northwards through the Balkans into the heart of Europe from Greece were overwhelmed, the scene in Vienna was one of order, with well-marshalled crowds waiting on platforms for the extra trains sent to take most of them onwards to Germany.

Now the rewards are coming for Kern, who has a manner much like his dark, slim-fitting suits, sharp and business-like.

There is little doubt that he is calm under pressure. In the middle of a live television interview from a Vienna train station during the initial rush of migrants in September, a man came up from behind him and shouted in his ear. Kern did not even flinch.

(Additional reporting by Shadia Nasralla; Editing by Mark Heinrich, Toni Reinhold)

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