By Jussi Rosendahl
HELSINKI (Reuters) - Finland's likely next prime minister Juha Sipila announced plans on Thursday to form a coalition with the Finns Party, which wants a tougher line on euro zone bailouts and immigration.
Sipila, head of the Centre Party, said the planned majority coalition in parliament would also include the centre-right National Coalition led by the previous prime minister, pro-EU Alexander Stubb.
"This was the best option. The biggest challenge is the economic situation. We need a strong coalition that is capable of planning reforms and implementing those decisions," Sipila told a news conference.
The entry of the Finns into Sipila's cabinet is a rare achievement among the new, often eurosceptic parties across Europe which have made big gains in elections but have been usually excluded from power by the established mainstream.
Fringe parties have gained support in the Nordic countries, often boosted by worries over immigration. In Sweden, mainstream parties have refused to deal with the Sweden Democrats, while in Norway the Progress Party is part of the ruling coalition.
Finland has suffered three years of recession, largely because of the downfall of Nokia (HEL:NOK1V)'s phone business and a slowdown in Europe and Russia. The outgoing, quarrelling left-right government failed to curb debt growth or step up reforms.
The Finns, led by Timo Soini, came second in April's election, scoring one more seat than the National Coalition.
Soini spooked financial markets in 2011 with his anti-bailout rhetoric, but has toned down his demands that Greece be kicked out of the euro zone.
"The situation in Greece is utterly horrible. I have my own view on how the situation should be handled, but we will together see what is possible," he told reporters on Thursday.
"But Greece is not in a form that it could survive on its own."
The Finns and the two other parties have said they could accept a third bailout for Greece from the EU rescue fund within its current capacity and capital structure.
The planned coalition parties will now start to negotiate over the government programme. If they fail to agree, the coalition formation could change.
The combination leaves the centre-left Social Democrats, which came fourth in the April 19 election, in opposition with four smaller parties.
In the planned government, Soini would likely assume the role of finance minister or foreign minister. But cabinet posts may not be known for weeks.
Sipila held talks this week with unions and business over competitiveness-boosting steps such as longer working hours and welfare reforms. Those talks broke down, suggesting the government may aim for spending cuts instead.
During the government talks, the Centre Party said it wanted the EU to abandon further integration of economic policy and aim to dismantle Europe's rescue fund in the long term.
Analysts, however, say such positions are likely to change during detailed negotiations on the new government.