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FinlandÕs European Affairs Minister Sampo Terho speaks in Helsinki, Finland June 5, 2017. REUTERS/Tuomas Forsell

(reuters_tickers)

By Tuomas Forsell and Jussi Rosendahl

HELSINKI (Reuters) - Finland's nationalist Finns party should stay in the centre-right government despite its upcoming leadership changes to ensure continuity in economic policy, Helsinki's Europe minister said on Monday.

Sampo Terho, who is campaigning to take over the eurosceptic party's leadership in a vote on Saturday, said the three-party coalition would be best to hold on until the 2019 general election because its austerity and reform programme was finally showing positive results.

His rival Jussi Halla-aho is a European Parliament deputy and anti-immigration hardliner who has hinted he might quit the coalition, which could derail planned health care and local government reforms in the government's drive to balance public finances.

Finland's economy is recovering from a decade of stagnation and a string of problems, including the decline of Nokia's former phone business. The government, which includes Prime Minister Juha Sipila's Centre Party and the conservative NCP, has cut spending and reformed labour laws to boost growth.

"It is important to have the government in place until the end of the term," Terho told Reuters in an interview.

"Our economy is growing and long-term unemployment is coming down after a long negative period, so it would be regrettable to endanger this development," he said. "The coalition must not be driven to inoperativeness at this stage of the election term."

Terho is the more moderate of the two candidates for the Finns leadership and seen as the favourite of the outgoing leader, Foreign Minister Timo Soini, whose decision to step down as party chief precipitated the leadership vote.

GRASS ROOTS WANTS TOUGHER LINE

The Finns party, formerly known as True Finns, is known for complicating EU bailout talks of troubled states during the euro zone debt crisis. But since joining the government in 2015, it has had to make compromises that have sent its support dropping.

In April's local government election, the party won 8.8 percent support, down from 17.7 percent in a 2015 parliamentary election. The reaction from the party's grass roots was to call for a tougher policy line.

The latest opinion poll by Taloustutkimus shows 40 percent of Finns voters back Halla-aho as the new party leader, while Terho has the support of 26 percent.

Terho argued the race was open and polls were inaccurate as any party member could show up and cast a vote in the party congress in Jyvaskyla, in central Finland, on Saturday.

While Halla-aho wants Finland to leave the European Union, Terho sticks to his government's official pro-EU line, saying he could only consider a referendum on EU membership after the 2019 election.

"The EU has changed a lot after Finland voted on joining it in 1994, and we did not have a referendum for joining the euro," said Terho, who was named minister for Europe, culture and sports only a month ago. "At some point it would be justified to measure the democratic legitimacy."

"On general level, I'm disturbed by the development where political and economical power is being taken from the member states to the central administration."

While some analysts have voiced their concern on the government's future after the Finns party vote, Nordea Bank chief economist Aki Kangasharju said he believed the coalition could avert a crisis.

"With early elections, the government would pass the puck straight to the Social Democrats and the opposition, and they won't let that happen," he said.

(Editing by Tom Heneghan)

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