By Matina Stevis

BRUSSELS--Banking crises should be dealt with by making bondholders forfeit part of their investment in struggling financial institutions and euro-zone bailouts should only be used in "rare and exceptional" cases, Finland's Prime Minister Jyrki Katainen said in an interview Wednesday.

"Most future crises can be solved with bail ins," Mr Katainen said. "We should separate public money from banking crises," he added.

His remarks open a crucial euro-area debate over the next step in the so-called banking-union project, which will see the creation of a common rulebook on bank resolution to avoid burdening taxpayers with bailout costs.

Ideas proposed for this include a euro-zone funded pool that can be drawn on to restructure or unwind ailing banks and eventually a euro-wide pot funded by the banks themselves. But Mr. Katainen said he wasn't keen on either idea.

The Finnish premier, who was speaking to a small number of reporters in Brussels, also said he was "not enthusiastic" about extending the ability of the euro-area bailout fund to directly recapitalize weak banks to "legacy assets."

He didn't exclude the mechanism being used for Ireland, which he said has been exemplary under its bailout program, but he noted the talks on the matter were ongoing.

Commenting on the tough negotiations between Cyprus and the troika of European Commission, European Central Bank and International Monetary Fund experts for a bailout package, Mr. Katainen said Russia too could be involved in a rescue deal.

He also called for "the full truth" to come to light with regard to allegations that Cyprus is rife with money-laundering operations. Mr. Katainen further noted that the European Stability Mechanism wouldn't be able to participate in a bailout for Cyprus if the country's debt couldn't be seen to be restored to sustainable levels in the medium-term.

Commenting on a much-anticipated speech by U.K. Prime Minister David Cameron planned for Friday on the U.K.'s relationship with the EU, Mr. Katainen said he was "really sad" that some Britons felt it was preferable to leave the EU.

"The EU without the U.K. is like fish without chips," he said, referring to the traditional U.K. dish. "It's not a real meal."

He added that the U.K. has stood to gain from its participation in the European single market, and rejected claims that the EU imposes regulations that build market rigidities and hamper countries' competitiveness.

"Many other competitive economies like Germany's, Sweden's, Finland's share these policies and they haven't harmed our competitiveness," Mr. Katainen noted.

Write to Matina Stevis at matina.stevis@dowjones.com