AS THE PATH towards government becomes clearer for Labour and Fine Gael, the potential partners have clashed over how to deal with the country’s financial crisis now that a deal with the IMF is unavoidable.

Labour leader Eamon Gilmore said that the previously proposed €6 billion budget ‘adjustment’ was no longer necessary as Ireland’s position had been strengthened by the arrival of funds from the IMF and Europe. Gilmore insisted that the €6 billion sum was put forward to win back the confidence of international investors – and as Ireland would not be returning to the bond market for three years the figure should no longer stand.

He said the argument that Ireland needed to “frontload” cuts to convince the markets was now redundant: “We are now out of the markets, so who now is the six billion meant to convince or meant to impress?” he asked.

Gilmore added:

We are in a new situation now where we have to look at what is in the best interests of the economy and economic growth. Our view is an emphasis on growing the economy and on creating jobs.

Labour said it would not support the budget and would not abstain in the vote – and also condemned the idea of putting off a general election until January, saying that a snap election would put a new government in a stronger position for negotiations with the IMF and Europe. He said that he would not allow the IMF to “roll over” a new administration.

He added that Labour and Fine Gael were the most likely partners in a new government, and the only question was which would be the bigger party.

Meanwhile Fine Gael has said that it believes the €6 billion figure should stand and has not ruled out the possibility of allowing the government’s budget to go through in December.

Deputy Fine Gael leader James Reilly reasoned “If the budget produced was one that matched ours, then why would we oppose it?” However, Reilly added that he did expect that his party’s budget would be different.

He played down the clash between the parties, pointing out that Fine Gael and Labour had voted together on economic policy in the past and that they should be able to agree on a budget very quickly.

Both Labour and Fine Gael are calling for a general election to be held immediately. Fine Gael leader Enda Kenny attacked yesterday’s decision by the Green Party to leave government in January, saying it had plunged the country into more uncertainty.

Kenny said that a new government – with a clear majority – could prepare the four-year economic plan, complete negotiations with the EU and IMF, and frame a Budget for 2011.

The Greens came under fire from other opposition parties as well, with Sinn Féin’s Dáil leader Caoimhghín Ó Caoláin saying the move showed the party was ready “cut and run”, and Socialist Party MEP Joe Higgins accusing the party of “cynical posturing”.