* Sinn Fein now has five seats in the lower house
* Opinion poll predicts it could win up to 12 seats
* Still not seen as potential coalition partner
By Carmel Crimmins
DUBLIN, Nov 26 (Reuters) - Ireland's nationalist Sinn Fein party is having a good crisis.
Once the political wing of the now-dormant Irish Republican Army (IRA), the party won a fifth seat in Dublin's parliament at the expense of the government on Friday after its anti-austerity rhetoric struck a chord with the people of county Donegal.
Known internationally for its campaign against British rule during decades of violence in Northern Ireland, the leftwing party is picking up momentum south of the border amid public anger at a financial meltdown that has forced one of Europe's former economic stars into the arms of the IMF and EU.
An opinion poll showed it could pick up a record 12 seats in the next general election in the Republic, likely early next year, making it the second-largest opposition party in Dublin's parliament after Cowen's Fianna Fail are pushed from power.
Not bad for an organisation whose members were officially banned from speaking on Irish media until 1993.
"I'm around long enough to know that you don't judge the mood of the country on what happens in one by-election but I do think we are going to see a changed political landscape at the next general election," Sinn Fein's Martin McGuinness, former IRA commander, now deputy first minister in Northern Ireland, told Reuters.
"I think Sinn Fein are going to be very much at the heart of that."
Once viewed as a pariah both north and south of the border, Sinn Fein has swapped the Armalite rifle for the ballot box and now runs Northern Ireland in partnership with its former foes.
Its electoral track record in the Republic has been less stellar. Despite predictions that it would double its representation, Sinn Fein lost one seat at the last parliamentary poll in 2007, when Ireland's property boom was still in full swing.
VIOLENT PAST
Now, two years into a six-year cycle of swingeing tax hikes and spending cuts, and with the worst recession in the industrialised world under their belt, some Irish people are taking a second look at Sinn Fein's leftwing views.
The party has long argued that banks should be nationalised and bondholders burned. Some of those policies may well materialise under an IMF/EU bailout, expected to leave the state in control of three of the country's top banks and possibly offer loss-making swaps to some bondholders. [ID:nLDE6AP0BY]
Sinn Fein is the only party to call for delaying a 2014 deadline for getting the deficit under control to allow more economic growth. The view was endorsed by the country's most prestigious economic think-tank earlier this month.
An IMF/EU rescue package is likely to deal a killer blow at the next election to Fianna Fail, which has dominated Irish politics during the 90 years since it won independence.
The loss of sovereignty implied by accepting a bailout is humiliating for a country where politics are still cast in terms of the struggle against British colonial rule. It is a particular loss of face for Fianna Fail, which sees itself as the embodiment of Irish nationalism.
Keen to capitalise on the mood in the south, Sinn Fein's President Gerry Adams has said he will contest the Republic's next election. He is not taking any chances, standing in a safe seat in the border county of Louth.
"I don't think he resonates terribly well in the south. There is a history, there is a baggage and ultimately he is not seen as part of the system we have here," said David Farrell, professor of politics at University College Dublin.
Under Ireland's political system of proportional representation, Sinn Fein needs to attract vote transfers from supporters of other parties, and their history of being associated with violence may cap their gains.
Donegal, where Sinn Fein's candidate trounced a Fianna Fail member for a vacant seat on Friday, borders Northern Ireland and its voters would have a soft spot for nationalist parties that is unlikely to translate to many other areas.
Three of Sinn Fein's five MPs are based in border counties and the party may struggle to win support among middle-class voters wary of their violent roots and anti-EU stance.
"I would hate to see Sinn Fein have any power at all. I don't support them and I don't know anyone who does. They are a subversive party, it would be anarchy if they got in," said Dubliner Donal Neeson, 50, who works in financial services. (Editing by Louise Ireland)
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