By Jason Webb

MADRID, Sep 28 (Reuters) - The leader of Spain's Basque regional government said on Friday he will hold a referendum on the Basque Country's future in Spain and on talks to end ETA violence, putting the region on a collision course with Madrid.

Juan Jose Ibarretxe said Basques will vote on Oct. 25, 2008 on whether to authorise local political parties to start talks on the region's future status, which could include independence from Spain.

But Ibarretxe's announcement in the Basque parliament was immediately rebuffed by the Spanish government, which said calling a regional referendum was illegal under Spain's national constitution.

Ibarretxe, a member of the moderate Basque Nationalist Party, also said he wants the vote to authorise new peace talks with ETA guerrillas, who have killed more than 800 people in a 40-year campaign for independence for Basque territories.

While there would be no possibility of any actual vote on independence next year, Ibarretxe's plan guarantees a prominent role for the hypersensitive issue of Basque separatism in Spain's general elections, due in March.

The governing Socialists have a lead of several percentage points ahead of the elections, but the opposition has accused Prime Minister Jose Luis Rodriguez Zapatero of being soft on separatists in Spain's regions.

"Basque society is tired of ETA and disgusted by its inhumane violence," said Ibarretxe.

Ibarretxe said he would seek support from the Spanish government for the referendum, but his plan was rejected by Madrid.

"The rules of the game are set by the constitution," said Deputy Prime Minister Maria Teresa Fernandez de la Vega.

"Constitution, constitution, constitution," she repeated.

The leader of the opposition Popular Party, Mariano Rajoy, called the referendum proposal "blackmail".

Zapatero broke off peace talks with ETA last December after the rebels killed two people with a car bomb at Madrid airport.

The Basque Country, which has a distinctive language and customs, enjoys considerable autonomy over areas such as education and taxation of its 2 million people.

But the issue of Spanish unity stirs deep passions.

The Popular Party has already accused Zapatero of failing to insist local government buildings fly the Spanish national flag and failing to act against radical groups in Catalonia who have publicly burnt photographs of King Juan Carlos. (Additional reporting by Arantza Goyoaga)

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