Ireland: Parties agree on coalition government

Fine Gael leader Enda Kenny in Helsinki, Finland - 4 March 2011
Image caption Enda Kenny wants to renegotiate Ireland's EU/IMF bailout

The leaders of the Irish Republic's two largest parliamentary parties say they have agreed to form a new coalition government.

Talks between the centre-right Fine Gael and the centre-left Labour Party centred on how to tackle the deficit and public sector cuts.

Last week's election saw Fianna Fail roundly defeated over its handling of Ireland's economic crisis.

Fine Gael fell short of a majority with 76 seats while Labour took 37 seats.

After talks that went late into the night, Mr Kenny said final details would be worked out early on Sunday for presentation to both parties later in the day.

Labour leader Eamon Gilmore said he would recommend the coalition agreement to a special party conference on Sunday afternoon.

Mr Gilmore has not said how many cabinet positions his party had secured as the junior coalition partner. Mr Kenny would become Taoiseach, or prime minister.

Banking crisis

Both leaders pledged in the election campaign that they would seek to renegotiate the terms of Ireland's 85bn euro (£73bn; $119bn) joint European Union-International Monetary Fund (IMF) bailout.

But the parties differed on the scale of public sector cuts, the split between tax rises and spending cuts needed to reduce the budget deficit and the time frame for cutting the deficit.

The two leaders said the agreement reached on these points would be revealed later on Sunday when their government programme is published.

Beset by Ireland's economic meltdown, then-Prime Minister Brian Cowen called an early election. His Fianna Fail was reduced to 20 seats.

The global financial crisis revealed Ireland's biggest banks to be deeply exposed to bad debt.

The government moved to bail out the banks but the recession that hit Ireland meant the government no longer had the resources to fund all its commitments and the EU and the IMF stepped in with their own bailout.

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