UPDATE 1-Rehn appointed as Finland's central bank chief and ECB council member

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HELSINKI, May 18 (Reuters) - Former top EU economic official Olli Rehn was appointed as governor of the Bank of Finland on Friday for a seven-year term effective from July, the Finnish government said.

Rehn, currently the bank's deputy governor, was widely considered to be the favorite for the top job, which includes a seat on the European Central Bank's interest rate-setting Governing Council.

He is due to hold a news conference at 1000 GMT.

The 56-year-old, who has a doctorate from Oxford University, spent a decade at the European Commission and was economic and monetary affairs commissioner during the euro zone debt crisis.

In that role he became known for advocating strict fiscal discipline and structural reforms for troubled European states.

This week, he sounded a cautious note on the euro area's economic outlook, saying it faced "downside risks" due to uncertainty relating to the public finances and banks of some member countries.

Rehn, who belongs to Prime Minister Juha Sipila's Centre Party, also spent a short stint as Finland's economy minister, helping the government to clinch a historic labor reform deal with trade unions.

Rehn beat nine other applicants for the job, including ECB supervisory board member Pentti Hakkarainen, thanks to his view of economic and monetary policy and experience in international policymaking, said a council of lawmakers that proposed him for the job last month.

Rehn's term will start on July 12 as current governor Erkki Liikanen steps down after two terms. No major policy changes are expected.

Finland is seen as a moderately hawkish euro member that largely backs ECB President Mario Draghi, analysts say. (Reporting by Jussi Rosendahl Editing by Matthew Mpoke Bigg)