By Padraic Halpin and Conor Humphries
DUBLIN (Reuters) -Talks between Ireland’s two historically dominant centre-right parties and independent lawmakers have reached an agreement that will give a new coalition government a “comfortable majority,” a negotiator for one of the parties said on Wednesday.
Fianna Fail and Fine Gael, who led the outgoing coalition, have been in talks since they fell one seat short in a Nov. 29 election of the 87 needed to govern. The new deal is set to continue their previous high spending economic policy.
The parties had been aiming to finalise the deal before next week’s inauguration of U.S. President-elect Donald Trump, conscious that his pledges to cut corporate tax and impose tariffs pose a potentially major threat to Ireland’s foreign multinational-focused economy.
“There’s a group of nine independents now … and that brings us up to 95, so we’ve a comfortable majority,” Fianna Fail lawmaker James Lawless, one of the party’s negotiators, told RTE radio.
The new policy programme will be published later on Wednesday.
The plans will include a pledge to cut the VAT rate to 9% from 13.5% for food and catering service firms, some of whom are under pressure from rising costs, another of the Fianna Fail negotiators James Browne told RTE.
Ireland’s finance ministry estimated last year such a move would cost 545 million euros a year and described it as “unjustified”. The rate has previously been temporarily cut for the entire hospitality sector, most recently ending in 2023.
The outgoing coalition went to the polls on the heels of a 10.5 billion euro ($10.7 billion) giveaway budget of tax cuts and spending increases, largesse made possible by a surge in foreign multinational corporate tax revenues that has handed Ireland the healthiest public finances in Europe.
While the finance ministry expects those receipts to keep growing and deliver five more years of healthy budget surpluses, officials have consistently warned that they could decline at any time and may become more volatile if Trump follows through with his tariff plans.
Fianna Fail leader Micheal Martin is expected to return for a second stint as prime minister when parliament next sits on Jan. 22, having led the country from 2020 to 2022, and rotate the role again with outgoing premier Simon Harris of Fine Gael.
Fine Gael’s Paschal Donohoe, chair of the group of euro zone finance ministers, is tipped to return as finance minister.
(Reporting by by Conor Humphries and Padraic Halpin; Editing by Peter Graff, Barbara Lewis and Christina Fincher)
