Coalition talks between Fine Gael and Labour continue

Sinn Fein will have 14 TDs in opposition in the Irish parliament

On Friday Fine Gael and Labour negotiators are continuing their talks on the formation of a new Irish coalition government.

Both talks' teams, who have been briefed by senior civil servants on the state of the public finances, say the figures were worse than expected and the challenges, therefore, all the greater.

The Fine Gael leader, Enda Kenny, and the Labour leader, Eamon Gilmore, will both be out of the country from Friday morning until Saturday afternoon attending meetings; Mr Kenny will be in Helsinki for a gathering of the European People's Party while Mr Gilmore will be in Athens for a meeting of European socialist parties.

The negotiators have a deadline, the 31st Dail will sit on Wednesday, 9 March.

If the talks are to conclude successfully the Labour Party will have to put any agreement to a special delegate conference.

That meeting is provisionally scheduled for Sunday afternoon but with the negotiations apparently making slow progress - there is a virtual news blackout on how they're going - the conference may be delayed until Monday or Tuesday.

The two parties had many similar policies during the election, particularly in areas like health and getting value for tax-payers' money in the public service, but there were also some differences.

Fine Gael wanted 9bn euro taken out of the economy by 2016; Labour 7bn euro by 2016.

Enda Kenny argued that the lessons from the 1980s showed the quicker the debt problem is dealt with, the sooner growth returns and the less interest that has to be repaid.

Eamon Gilmore countered that there have been so many spending cuts and tax rises already that the the economy and citizens could not cope with what Fine Gael is suggesting.

Enda Kenny wants public service numbers reduced by 30,000; Labour, which has a big trades union constituency, by 18,000.

Eamon Gilmore believes that, as part of an austerity programme, the ratio between spending cuts and tax rises should be 50:50 but Fine Gael, a low-tax party, believes it should be 72:28.

If compromises can be reached in those key difficult areas the rest of the agreement will easily fall into place.

There are still those in both parties who would not like to see a coalition.

Many on the left of the Labour Party believe it should go into opposition, which it would lead after its best ever election performance, and force Fine Gael to govern alone with the support of independents.

Crisis

They don't want to see the smaller party take the blame for all the pain for the austerity programme that is part and parcel of the EU/IMF 85 bn euro bail-out loan.

Indeed, they argue, Labour could emerge as the biggest party after the next election and such a move would hasten proper left/right politics, as they see it.

There are also some in Fine Gael who would like to see single party government, especially as it would mean there are more ministerial jobs for the party to give out to its own TDs.

The two sets of negotiators have yet to decide how many cabinet portfolios each party will get and what jobs.

No matter who forms it the new Irish government will be immediately confronted with the banking and debt crisis.

Decisions will have to be taken quickly about putting tax-payers' money into the troubled financial institutions while an EU summit at the end of the month could have major implications for Ireland's bail-out loan at a time when the IMF has said it will relax part of the interest the Republic is currently paying.

The EU lenders have yet to make a similar decision.

Then there is the matter of whether senior bond holders - mainly British, French and German banks who lent recklessly to Irish financial institutions - will share the burden with the Republic's tax payer of dealing with the country's troubled banks.

Labour and Fine Gael are both keen on burden sharing but senior EU figures appear less so, at least for the moment.

The negotiators face a both a busy weekend and more than likely, assuming a successful coalition conclusion, an extremely difficult period in government.

The 31st Dail will provide a lot of public pain.

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