| 8.5°C Dublin

Coalition talks stall over battle for Finance job

LABOUR'S demand for the Finance Ministry forced coalition talks into stalemate today.

Neither Enda Kenny nor Eamon Gilmore are ready to give up the crucial portfolio to allow a quick deal on a new government.

Sources told the Herald that the negotiations were progressing well until filling the Department of Finance was raised.

"Fine Gael feel that they must have control of Finance. They say the people voted for them on the back of their economic policies," said an insider.

Both sides were today desperately trying to find a formula to end the impasse.

Labour may for the first time demand FG cede the Dept of Justice as a compromise.

The row could push Fine Gael into the arms of Independents such as Shane Ross, Stephen Donnelly and Micheal Lowry.

Labour has provisionally scheduled a meeting of party delegates for Sunday with a view to holding a vote on whether they should enter a coalition.

The talks are likely to run right up to that deadline as they attempt to thrash out an arrangement.

The Herald understands that Fine Gael is willing to forego the justice portfolio, while similarities in the two party's health plans should lead to a compromise on that "poisoned chalice".

Hardball

But senior Labour members have warned their negotiating team of Pat Rabbitte, Joan Burton and Brendan Howlin to "play hardball".

With 37 seats, the party believes that it is entitled to a number of significant offices including finance.

While both parties agree on the need to change the terms of the IMF/EU bailout, their plans for economic recovery are totally different.

Fine Gael's finance plan has promised to reduce the national deficit to 3pc of GDP by 2014 but Labour says that deadline should be two years later. They are also split over how to claw the money back through spending cuts and tax hikes.

Labour maintains that there should be a 50/50 split but Fine Gael has set targets of 73pc spending cuts against 27pc taxes.

It is likely that they can reach compromise on some of the figures but overall control of the department for the next five years could turn into a redline issue.

They were also dealt a blow yesterday when German Chancellor Angela Merkel appeared to rule out changes to the rate of interest on Ireland's €85bn bailout.

The economy was set to be the subject of further discussions between the two negotiating teams today.

Over the past three days, they received briefings from the Department of Finance, Central Bank governor Patrick Honohan and the National Treasury Management Agency.

Michael Noonan revealed that those presentations alerted them to "certain matters" that they were unaware of up to now, while Joan Burton said described the situation as "very sobering".

Neither party is making any official comment on the content of the lockdown talks, which have been described by sources as "cordial".

Both teams were back at the Sycamore Room in Government Buildings today where Taoiseach Brian Cowen has sanctioned the full use of Government facilities.

hnews@herald.ie