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Economy update crucial to outcome of coalition talks

AN update on the economy is dominating the coalition negotiations between Fine Gael and Labour.

Advisers from the Department of Finance briefed the two parties, who have until this weekend to thrash out a deal on a new partnership.

The two sides held talks for up to eight hours yesterday starting with an hour-long meeting between party leaders Enda Kenny and Eamon Gilmore, which started at 9am.

At noon, the two teams met for a further two hours, broke for lunch and then resumed for a further three hours until 6.30pm. They resumed at 8pm.

The Fine Gael team is made up of Michael Noonan, Phil Hogan and Alan Shatter, supported by policy adviser Andrew McDowell.

Labour's team includes Brendan Howlin, Joan Burton and Pat Rabbitte, backed by policy adviser Colm O'Reardon.

Talks resumed this morning as the last Dail seat was filled in Galway West.

Both sides were keen to stress that a coalition between the two cannot be taken for granted and that there are other options open to the two parties.

Mr Gilmore said Labour would go into opposition if the negotiations did not succeed. He agreed that the gap between the parties over the size of the adjustment and the timescale for reducing the national deficit to 3pc of national income were among the major issues.

The negotiators are understood to have received the latest briefings from the Department of Finance on the current and projected state of the public finances. The briefings also covered the current state of play in the banking sector. The intention was to give both parties a full picture before they get down to the finer detail of the negotiations.

The key sticking point is expected to be on economic policy, Mr Gilmore acknowledged.

"That will be one of the issues that will be under discussion. Everyone has a fair idea where the points of difference are in terms of policy," he said.

csheehy@herald.ie