Undoubtedly, the June 1977 general election result was the crowning point of Mr Lynch's political career and made his position as party leader apparently unassailable.
Fianna Fail increased its share of the vote from 46.2 per cent in 1973 to 50.6 per cent. This pushed its number of seats in the Dail from 68 to 84, or 21 seats more than all the other parties combined.
In retrospect, Mr Lynch realised the party had promised too much to the electorate. In an effort to deliver on those promises the man behind the programme, Mr O'Donoghue, was made Minister for Economic Planning and Development. To work, Mr O'Donoghue's plan depended on an end to the world recession, combined with wage restraint and greater enterprise by business at home. None of these materialised and, after a temporary easing of unemployment, the numbers on the dole began to grow again and the public expenditure programme saddled the economy with an enormous public debt.
In a characteristic gesture, Mr Lynch declined the honour of a civic reception in his native Cork after his election. He said it would not be appropriate to transform a political victory into a civic demonstration. He also decided to appoint an independent commission to review electoral boundaries and end the practice whereby the incumbent Minister for the Environment decided them.
His Senate appointments also reflected an element of non-partisanship, with the usual quota of Fianna Fail luminaries leavened by Dr T.K. Whitaker, the former Secretary of the Department of Finance, businessman Mr Gordon Lambert and Lady Valerie Goulding. Mr Lynch also warned that Fianna Fail supporters in other areas of life should not automatically expect government preferment.
The new Taoiseach was not overburdened with talent on his front bench, and it came as no surprise when Mr Haughey was selected as Minister for Health and Social Welfare. But Mr Lynch remained undeterred in his commitment to a moderate stance on the North, pressing the British government to declare its interest in the ultimate reunification of Ireland by peaceful means, but not a commitment for the withdrawal of troops.
When he eventually had his first summit with the British Prime Minister, Mr Callaghan, he came back with promises of further attempts to find an acceptable formula for devolved government in Northern Ireland and - if no commitment on the issue of national unity - at least an assurance that the British government would not embark on an integrationalist solution to the problem.
Mr Lynch's moderate stance also ensured that the bipartisan approach in Leinster House continued. The economic programme showed signs of being off course as early as October, 1977, when the Government's five per cent pay norm was shown to be far too optimistic in a society experiencing double-figure inflation rates. One important gain in 1977 was to secure more regional aid from the EEC while keeping Ireland's own contributions at a modest level, despite increasing pressure from some of the larger partners.
In January, 1978, Mr Lynch was involved in controversy over statements he made on the North in an RTE interview. In this he discussed the possibility of an amnesty for paramilitaries if hostilities in the North ended and said he still hoped for "an easing out" of the North by the British government. This brought down a welter of criticism from the unionists and, less predictably, from the new Fine Gael leader, Dr Garret FitzGerald, and new Labour leader, Mr Frank Cluskey.
Another controversy that month arose over the dismissal of the Garda Commissioner, Mr Edmund Garvey. Mr Garvey sued successfully for compensation. These incidents were, however, embarrassments rather than serious crises for the Lynch Administration.
The economy continued to be a crucial issue, with Mr Lynch defending a reflationary budget in 1978, saying the possibility of creating more jobs justified the gamble. By 1978 public borrowing had reached 13 per cent of GNP and £1 in every five of tax revenue was going to service it. The year also witnessed a major telecommunications dispute with post office engineers, which was damaging to the economy and did not succeed in maintaining the government's pay norm limit.
The North also continued to cause problems. The Taoiseach was involved in controversies with Mrs Betty Williams, the Peace People leader, and the Northern Ireland Secretary, Mr Roy Mason, also created tension. On the other hand, direct discussions between Mr Lynch and Mr Callaghan continued to be fruitful and in early 1978 the first steps were taken towards serious economic co-operation in the depressed Border areas.
In May, 1978, Mr Lynch addressed the United Nations and called on all nations to agree to limit their military expenditure to a fixed percentage of GNP as the first step towards world disarmament. He also called for a comprehensive nuclear test ban treaty.
Domestic issues continued to be paramount, however, with the Government giving a commitment in its new Green Paper on the economy to create full employment by the mid-1980s and Mr Lynch giving a confident prediction that the break with sterling to join the EMS could also result in jobs for all. Instead, its main impact was to reinforce the high inflation rate.
In March, the Government faced massive protests from alienated PAYE workers who held a series of union-organised marches in protest at the Government's climb-down on farmer taxation and there were more strikes to cripple the economy, involving postal, port and oil services. Room for manoeuvre was rapidly diminishing as inflation, unemployment and the national debt all soared.
In the following months, a "National Understanding" was reached between employers, trade unions and the Government. In the most ambitious tripartite agreement ever made in the country, wage levels were to be restricted to 15 per cent over 15 months and in return the Government undertook to implement a series of measures aimed at boosting employment, reforming the social welfare system and alleviating the PAYE tax burden. In the event, the Government proved unable to deliver on many of its promises, but, significantly, it was the employers rather than the unions who were most reluctant to renew the understanding.
None of this helped Fianna Fail in the election to the European Parliament in June, 1979, when industrial troubles, controversy over Dublin's medieval Wood Quay site and the possible construction of a nuclear power at Carnsore Point, in Co Wexford, and, finally, internal divisions within Fianna Fail on its new Family Planning Bill, provided an unsympathetic backdrop to polling day. Fianna Fail polled the worst-ever vote since coming to office in 1932 with only 34.68 per cent, compared with 33.16 per cent for Fine Gael.
Then, in August, came the Mullaghmore bombing that killed Lord Mountbatten and several members of his family. Mr Lynch attended the State funeral in London, where he met the new British Prime Minister, Mrs Margaret Thatcher. She used the opportunity to demand greater security co-operation on the Border and reports appeared that she also wanted the right of "hot pursuit" for the British army into the Republic.
Mr Lynch dismissed the idea as "dangerous" and "counter-productive" and pressed the British government to take a new political initiative in the North as a more effective way of defeating the Provisional IRA, which had claimed responsibility for the Mullaghmore incident. But a communique issued after a summit of the two leaders put the emphasis very much on security. There was no reference in it to Irish unity, only a noting of the Taoiseach's concern that any new devolved government in the North would have to have the support of the nationalist community.
Four days later one of the youngest and most militantly republican of Fianna Fail deputies, Miss Sile de Valera, spoke at the annual Liam Lynch commemoration in Fermoy, Co Cork, where she effectively questioned the republican credentials of the Taoiseach and his willingness and ability to seek national unity. Mr Lynch made it clear that he had no intention "to pressurise our Northern fellow-countrymen to take steps they are not ready for", and at a special meeting of the parliamentary party on September 28th, the party unanimously supported him.
October produced more problems, with growing rumours and media speculation over the extent of the co-operation agreed by the Irish and British governments on Border security. My Lynch adopted the position that such security arrangements were confidential, but came under increasing pressure within his own party to provide details. A number of Fianna Fail deputies declared open opposition to the idea of British troops being "ferried" through the Republic's territory for any reason and the Taoiseach's silence gave ammunition to the growing opposition caucus in Fianna Fail.
Worse was to follow for the Taoiseach when the deaths of Labour TD Pat Kerrigan and Fianna Fail deputy Sean Brosnan caused by-elections in Cork City and Cork East respectively on November 7th, 1979. On the eve of the polls, Mr Lynch made a personal appeal for votes on behalf of the Fianna Fail candidates but the rally drew an ominously small crowd and both seats were won by the Opposition, with Fine Gael and Labour sharing the honours.
Even before the by-election results were in, Mr Lynch had travelled to America to seek support from the Carter administration for his Northern policy. While in America, he publicly dismissed reports that he was again considering resignation. After a meeting between the two leaders, President Carter gave a pledge to crack down on Provisional IRA fund-raisers and arms suppliers.
On November 9th, however, only a day after dismissing resignation rumours, Mr Lynch inadvertently admitted that British overflights had been permitted in the Border areas and a Clare deputy, Dr Bill Loughnane, accused him of lying. The deputy party leader, Mr Colley, undertook the task of disciplining Dr Loughnane, and other front-bench members of the party, most notably Mr O'Malley, came to the Taoiseach's defence.
On the Taoiseach's return, however, he successfully answered opposition questions on Border overflights by the British. He said they were standard under the air regulations and had been taking place since 1974. At the following meeting of the parliamentary party, the much-rumoured challenge failed to materialise and subsequent media speculation was on an expected Cabinet reshuffle rather than his continuing leadership.
Nevertheless, the anti-Lynch caucus continued to campaign and when the Taoiseach received word of a petition against him, he decided to move first. On December 5th, he announced his intention to resign. The suddenness of the decision created chaos in Brussels, as Ireland was still holding the EEC presidency, and it was an indication of Mr Lynch's concern over the growing support for Mr Haughey. Although he was careful to state publicly that he believed both the main contenders for the leadership, Mr Colley and Mr Haughey, were acceptable to him, he made no secret of his preference for the former.
It was a close contest, with Mr Haughey winning by 44 votes to Mr Colley's 38. Afterwards, Mr Lynch sought unsuccessfully to bridge the gap between the two factions and received a well-publicised rebuff from Mr Haughey when he requested that his former Minister for Economic Planning and Development, Mr O'Donoghue, be offered the EEC Commissionership. Mr Haughey had already agreed to give the job to Mr Michael O'Kennedy, who had supported him in the leadership contest.