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UPDATE 2-Canada's veteran finance minister quits, budget surplus in sight

OTTAWA, March 18 (Reuters) - Canada's Jim Flaherty, the long-serving Conservative finance minister who helped steer the economy through the global financial crisis, resigned from politics on Tuesday, leaving the country on track to balance its books by 2015.

Flaherty, 64, ends the third-longest stint as finance minister in the country's history. He has been suffering acutely from a rare skin disease, though he denied his resignation had anything to do with health.

Analysts said Canada's Conservative government was likely to stick with the plan to balance the budget in 2015, leaving Flaherty's successor to decide what to do with the surpluses projected for coming years.

Flaherty is an outspoken man who was quick on his feet in parliamentary debates and was equally comfortable picking a fight or cracking a joke, and he has been at the side of Prime Minister Stephen Harper ever since the Conservatives took power in 2006. He cut business and sales taxes and then put through a record deficit in nominal dollar terms to counter the recession.

Amid speculation he might step aside to attend to his health, Flaherty stubbornly and repeatedly vowed to stay on the job until the budget was balanced. The budget plan he presented last month shows that will be achieved next year.

"Yesterday, I informed the Prime Minister that I am resigning from Cabinet. This was a decision I made with my family earlier this year, as I will be returning to the private sector," he said in a statement accompanied by a picture of him standing at an office door waving goodbye.

Harper said he would announce Flaherty's replacement in coming days. Leading contenders are believed to be Industry Minister James Moore, Treasury Board President Tony Clement, Foreign Minister John Baird, and Employment Minister Jason Kenney.

There were hints in recent months that Flaherty was eyeing the door. He began to stray from the Conservative Party script in his public comments, most recently initiating a high-profile disagreement with Harper over tax cuts the prime minister had promised in the 2011 election campaign.

At a press conference following a meeting of G20 finance ministers in Sydney, Australia, he appeared disengaged from the broader international agenda and focused solely on Canadian fiscal issues.

Harper said he accepted Flaherty's resignation "with great reluctance" and praised him for having a steady hand throughout the crisis.

Financial markets took the news in stride, as few expect any significant shift in fiscal policy by his successor.

"We know nothing that would suggest that there's any schism between himself and anybody else in the party on policy, so I would say that this is not policy related," said Mark Chandler, economist at the Royal Bank of Canada.

Doug Porter, deputy chief economist at BMO Capital Markets, said Flaherty's exit was expected, though not this soon.

Flaherty kept a grueling schedule prior to 2013, crisscrossing the country and traveling abroad to promote the government's agenda and speaking to reporters once a week or more.

He revealed a year ago that he is battling a rare skin disease that causes painful blisters on the body. The condition is incurable but can be managed with powerful medication that has unpleasant side effects, including weight gain and mood swings.

He has dramatically scaled back his activities and often appeared red-faced and short of breath, walking very gingerly and wincing occasionally. During travel, his staff went to great lengths to minimize his walking and avoid stairs.

But he was uncomfortable talking about the issue, according to sources close to him, and on Tuesday denied that his health played a role in his resignation.

"I am happy to report that I am on the road to a full recovery and the decision to leave politics was not related in any way to my health," Flaherty said.

"This decision was made because it is the right one for me and my family at this time."