By Emma Thomasson

AMSTERDAM, April 3 (Reuters) - The Netherlands has breathed a sigh of relief at muted reaction at home and abroad to a film critical of the Koran that seems to have done more for the standing of the prime minister than the populist who made it.

But there is still a sizeable audience in the country for the kind of anti-Islam, anti-immigration rhetoric first popularised by maverick politician Pim Fortuyn in 2002 that is likely to keep Dutch politics fragmented and unstable.

Worried about a repeat of violent protests and consumer boycotts that followed the publication of Danish cartoons lampooning Islam's Prophet Mohammad in 2006, the Dutch government has been on a charm offensive with the Muslim world.

Geert Wilders, leader of the right-wing Freedom Party (PVV), launched his short video on the Internet on Thursday, drawing a stream of condemnation from the Islamic world although Dutch Muslim leaders said it was not as provocative as they feared.

"The film was a bit of an anti-climax," said Marcel Boogers, a political scientist from Tilburg University.

"People are a bit tired of Wilders. They had heard about the film for months and now it has come and it is not so spectacular. There are more problems in the country than the opening of new mosques and radical Islam."

Titled "fitna" or "strife" in Arabic, the film warns that Muslim immigration is undermining western values and urges Muslims to tear out "hate-filled" verses from the Koran, mixing images of bombings with quotations from Islam's holy book.

In a heated debate in parliament on Tuesday, Wilders accused the government of sowing panic about the film, but ministers said they had expected the film to be even more inflammatory and include scenes of pages being torn from the Koran and burned.

Wilders denied he had told the government in advance about the content of his film, accusing ministers of lying about conversations he had with officials, but the cabinet won broad support from other parties in parliament for its approach.

Prime Minister Jan Peter Balkenende has repeatedly stated that the government rejects Wilders' views and made a televised statement after the film appeared last Thursday in Dutch and English to urge Muslims not to be provoked by Wilders.

He has said he is prime minister to all 16 million people in the Netherlands, including the around one million Muslims.

"FEAR AND XENOPHOBIA"

The strategy seems to have paid off with only limited Muslim protests and boycotts of Dutch products so far.

A poll by Interview NSS showed support for his ruling Christian Democrats (CDA) rising to 39 seats out of a possible 150 from 35 seats a week before, while Wilders' party was down two at 10 seats, just above the nine it won in the last vote.

"The party which seems to have profited most from all the fuss is the CDA," Interview NSS said. "Balkenende's approach seems to have been rewarded."

A poll by Maurice de Hond also showed gains for the CDA but put the PVV on 15 seats and said it could even win as many as 25 seats if it was not for the creation of a new right-wing party by former Immigration Minister Rita Verdonk, now on 17 seats.

"The PVV is the result of fear and feelings of xenophobia in the Dutch population," commented the NRC Handelsblad daily.

"The earlier successes of Pim Fortuyn and the popularity of a politician like Rita Verdonk show that there is still a lot of dissatisfaction to which the 'classic' parties have not yet found an appropriate answer."

The flamboyant Fortuyn took Dutch politics by storm in 2002 with his taboo-busting criticism of immigration and Islam.

The country was stunned when he was shot dead by a leftist activist and his party soared to second place in an election a few days later. It was shaken further when a Dutch-Moroccan murdered filmmaker and Islam critic Theo van Gogh in 2004.

Dutch politics have been in turmoil ever since with parties from left to right clamouring to capitalise on unease about immigration, globalisation and social change.

Without the charismatic Fortuyn at its head, his party soon imploded, but Wilders filled the gap, taking 6 percent of the vote in a 2006 election that saw voters abandon mainstream parties for populists on both left and right.

That forced Balkenende into a centrist coalition with his erstwhile Labour rivals and a small Protestant party.

The fragmentation of an already crowded Dutch political scene continues apace with the hardline Verdonk due to launch her "Proud of the Netherlands" movement later on Thursday.

Verdonk, formerly a member of the liberal VVD, made her name in the previous cabinet with plans to expel 26,000 failed asylum seekers and force immigrants to take tough integration tests.

"People who are disappointed with Wilders might go in the direction of Verdonk because she is just as populist but more moderate in her policies and has government experience and a reputation for action," Boogers said.

"There is still a lot of support for populist parties but eventually I think they will come together to create new parties other than the classic left and right."

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