UPDATE 1-Ireland's Greens pose threat to "bad bank"

* Govt needs Green Party support to pass "bad bank" bill

* Special convention on the bill close to being called

(Adds party leader comments, analyst comment)

By Carmel Crimmins

DUBLIN, Aug 13 (Reuters) - Members of the Green Party, Ireland's junior coalition partner, are calling for an internal debate on plans to create a "bad bank" in a potential threat to government efforts to clean up the country's financial system.

Finance Minister Brian Lenihan will recall parliament on Sept. 16 to debate legislation creating the National Asset Management Agency (NAMA) but some Green Party members want to thrash out the law's implications before giving it support.

Ireland is planning to park risky property loans with a nominal value of 90 billion euros in NAMA to restore the flow of credit and confidence to an economy that has morphed from the "Celtic Tiger" to the euro zone's weakest link.

"What the Green Party grassroots are looking for is a debate before the legislation is supported or not supported by our parliamentary party," Tony McDermott, a party member and former Green councillor, told state broadcaster RTE on Thursday.

The leader of the left-wing Green's, John Gormley, said it would listen to suggestions on the "bad bank" from its members.

"As the most democratic party in this country we welcome our members' participation in policy formulation on this and all other issues," Gormley said in a statement.

THE BALANCE OF POWER

The six Green Party members of parliament hold the balance of power in Ireland's lower chamber after defections from the main government party, Fianna Fail, over harsh spending cuts.

But some grassroots members are unhappy about the party's continued role in government after it suffered near annihilation in local and European elections in June amid widespread voter anger about the state of the former "Celtic Tiger" economy.

The Green Party's executive committee will call a special convention on NAMA if it receives requests from five constituency groups. Votes in a special convention have to be carried by a two thirds majority.

It has received three valid requests so far. There were queries about a fourth.

"This is a serious threat. It seems likely that they will get five branches, which is all they need but they then need to get a two thirds majority which will be more difficult," said Michael Marsh, a professor of political science at Trinity College Dublin.

"Something like NAMA has to be done so then you are talking about how it's to be done not whether it's to be done."

If two thirds of Green members were to vote against NAMA, parliamentary members would be blocked from supporting the legislation, throwing Lenihan's plans and the future of the government into disarray.

The government, whose technical majority was wiped out following the defection of two parliamentary members earlier this month, faces a rocky autumn.

The public, already forced to swallow tax hikes and spending cuts, is unhappy about having to fork out tens of billions of euros to pay for the "bad bank" scheme.

Lenihan will reveal on September 16 what sort of writedown he will demand off the banks for taking on their loans. A view that the lenders and property developers are getting off lightly will make it more difficult for the government to push through another austerity budget in December.

The Greens, who have already warned that another round of fiscal pain could make their government partnership difficult, will hold a party convention later this year on their programme for government. (Reporting by Carmel Crimmins; Editing by Jon Loades-Carter/Richard Hubbard)