Fine Gael and Labour are preparing to renew their Coalition agreement in the wake of the Labour leadership contest but well-placed sources in both parties say major policy hurdles are likely to surface.
This is in addition to the challenge posed by the Cabinet reshuffle, which is expected soon after the Labour leadership is settled.
While the reshuffle is in the gift of Taoiseach Enda Kenny he will face demands on this front from Tánaiste Eamon Gilmore’s successor. Although some in Labour would like the party to take command of the jobs portfolio, Fine Gael sources have been insisting the party would resist any such claim.
Minister for Social Protection Joan Burton is perceived to be well ahead of Minister of State for Health Alex White in the race to succeed Mr Gilmore but the outcome will not be known until Friday week.
This has not prevented high-level officials in the two Government parties from preparing the ground for talks to “reset” the Coalition pact for the run-in to the general election and give fresh impetus to its work.
Budget deficit target The overwhelming consensus remains that there should be no move away from the core economic policy of achieving a 3 per cent budget deficit next year. While Mr White called this into question at a public husting two weeks ago, the notion of easing the deficit target
does not appear to have gained traction.
Meanwhile, public signals in the past week from both Minister for Finance Michael Noonan and Mr Gilmore suggest the rate of fiscal retrenchment will fall well short of the €2 billion sought by the IMF, the EU Commission and the Irish Fiscal Advisory Council.
While the eventual “adjustment” figure will be a matter for negotiation in advance of the mid-October budget, the proximity of that date means the matter will have be dealt with quickly. One key issue to be settled is the extent to which Fine Gael presses to intensify welfare changes in Ms Burton’s department.
The Minister has always argued that she has undertaken maximum effort on this front. In recent months she has argued that there should be no further welfare or education cuts and called for greater value for money to be extracted from the health budget
However, Fine Gael sources say the requirement for greater welfare changes was underlined by new figures last week which suggested a quarter of households are out of work.
Senior figures on both sides said there will no new programme for government as any push to recast it might create too much friction.
