TALKS BETWEEN Fine Gael and Labour on the formation of a coalition government entered a crucial phase last night with strongly divergent views on the time frame for getting the public finances back on track.
Sources close to both sides reported that there had also been serious tensions yesterday over which party would get the Finance portfolio. But this problem appeared to have eased last night.
“The really important issue is fiscal policy and the time-frame for dealing with the current mess. If that can be sorted the question of who gets Finance should not be an issue, but there is no guarantee that it can be sorted,” said one source.
Fine Gael is insisting that the €9 billion adjustment in the public finances be completed by 2014 as agreed under the EU-IMF while Labour wants the target date pushed back to 2016.
In the negotiations to date Fine Gael is believed to have stressed that the party has received a mandate to get the job finished by 2014, while Labour negotiators have argued that it will be impossible to achieve the target in that time-frame without severe damage to the economy.
The agreement of the EU and the IMF will be required if there is any change in the time-frame or the overall targets set out in the four-year plan.
On the third full day of negotiations the teams engaged for the first time in detailed discussions on the policy issues dividing them.
Both sides acknowledged the difficulties of finding an accommodation on the scale and timing of the downward adjustment of State spending, as well as the appropriate number of job reductions in the public sector.
At one stage a disagreement between Fine Gael and Labour over which party should get the Finance portfolio appeared to become a sticking point but the parties agreed to put it to one side and deal with the policy issues that divide them.
Fine Gael and Labour sources expressed the view last night that agreement was by no means assured.
Fine Gael sources outside the talks suggested that the party had a strong fall-back position and could realistically hope to form a government without the support of Labour.
On the Labour side sources pointed out that any deal will have to be seen to have a strong input from the party as it will have to be approved by a delegate conference on Sunday.
Party leaders Enda Kenny and Eamon Gilmore met in the morning to discuss progress before the two negotiating teams came together.
A Fine Gael spokesman said economic and banking matters were still dominant but that discussions broadened out to include health, education and other areas.
Officials and outside advisers from the parties have been working in tandem with negotiators in drawing up position papers on less contentious policy areas that can be quickly agreed by the negotiating teams at the end of the process.
The Fine Gael team is led by its finance spokesman Michael Noonan who is accompanied by Alan Shatter and Phil Hogan. The Labour Party team is led by Brendan Howlin and also includes Pat Rabbitte and Joan Burton.
The teams were briefed by economist Colm McCarthy yesterday. He chaired the group which made recommendations to the Government on the disposal of non-strategic State assets.
The report is finished but was withheld from publication until after the election.
Claims by Fine Gael and Labour negotiators that the public finances were “worse than they thought” were dismissed by Fianna Fáil frontbencher Dara Calleary who said that such comments were a prelude to abandoning their election promises.
“The very solemn, but equally predictable warnings by Michael Noonan and Joan Burton should be seen for what they are, a softening up exercise in advance of the inevitable abandonment of their various uncosted and cynical election promises,” said Mr Calleary.
Enda Kenny will be in Helsinki today for a meeting of the European People’s Party where he will join the leaders of 14 EU countries in a discussion of the major issues facing the EU, including the Irish bank bailout.