Finnish Prime Minister Antti Rinne resigned on Tuesday after losing the support of the coalition partner Centre Party, though the governing alliance is expected to stay in power to avoid a snap election.

A Social Democrat who has headed the centre-left five-party government since June, Rinne handed his resignation to President Sauli Niinisto, who asked the government to stay on in a caretaker capacity until a new government has been appointed, the presidency said.

"All of the governing parties have confidence in me, except the Centre Party. When I was told why they no longer have confidence in me, I made the decision to resign," Rinne said.

The Centre Party was angered after the prime minister was accused of lying by the head of Finland Post -- the culmination of a long-running dispute over reforms to the pay and conditions for some postal workers.

Antti Rinne (R) denied that the state had approved Finland Post's plan, but the following day the company's chairman of the board accused Rinne of lying
Antti Rinne (R) denied that the state had approved Finland Post's plan, but the following day the company's chairman of the board accused Rinne of lying Lehtikuva / Jussi Nukari

"All of the government parties are committed to the... government programme. If (me) being prime minister jeopardises the government programme, it is better that I steer clear of it," Rinne told reporters.

The Social Democrats, Finland's biggest party, will now appoint a successor to try to form a new government, which could take days or even weeks.

Sanna Marin, the party's number two behind Rinne and the current minister of transport, has already said she would be willing to take over.

Political analyst Sini Korpinen said the coalition parties -- the Social Democratic Party (SDP), Centre, Greens, Left Alliance and Swedish People's Party -- would in all likelihood agree to carry on together, as it was not in any of their interests to bring down the government.

That is especially true for the Centre Party, which "doesn't want elections because they'd do worse" than last time.

Rinne, right, resigns to the Finland's president
Rinne, right, resigns to the Finland's president Lehtikuva / Jussi Nukari

"The most probable (scenario) is that they will carry on, with the same government programme" but possibly changing a few cabinet ministers, she told AFP.

Rinne's resignation comes after several weeks of political crisis over a plan to move 700 employees of Finland Post, a public limited company with the state as sole shareholder, to a less advantageous collective wage agreement to improve competition.

In September, criticism initially focused on the minister in charge of state ownership, Sirpa Paatero, a member of Rinne's SDP.

The crisis deepened in November when a large strike broke out, with employees of other industries walking off the job in sympathy with the postal employees, which is permitted under Finnish labour law.

Finland Post withdrew its reform plans, but unions demanded to know whether the state had approved the reform. Paatero made several contradictory remarks before Rinne stepped in on November 28.

The prime minister denied that the state had given its blessing, but the following day the company's chairman of the board accused Rinne of lying.

Rinne then announced Paatero's resignation, but the move was seen as too little too late.

The Social Democrats won April's legislative elections on promises to end years of economic belt-tightening introduced by the Centre Party to lift Finland out of a recession, and prioritising social equality.