Gilmore gets the green light to carve out deal
But senior Labour figures warn him: Not at any price
Labour chiefs last night gave their leader Eamon Gilmore the green light to enter coalition talks with Fine Gael.
But senior figures warned him the party would still be prepared to go into opposition if the deal was not good enough.
Fine Gael sources still insisted economic policy would be the key area to be thrashed out.
The prospective coalition partners got a boost as the European Commission indicated a willingness to reduce the interest rate on the bailout fund.
Mr Gilmore met Fine Gael leader Enda Kenny for 80 minutes yesterday to begin talks as counting in three constituencies continued.
Some 12 seats remain to be filled in Wicklow, Laois-Offaly and Galway West.
Former European Affairs Minister Dick Roche was eliminated in Wicklow after he demanded a recount.
Loud cheers and applause erupted in the count centre when Mr Roche was finally defeated, amid bitter infighting, with his running mate accusing Fianna Fail of "disgusting" behaviour.
Mr Kenny and Mr Gilmore will meet again today at 9am before handing over to teams of negotiators to hammer out the shape of the new government.
Mr Kenny finally got in contact with Mr Gilmore after a false start on Sunday night. In an inauspicious beginning to the new coalition, the FG leader left a message on the Labour leader's old mobile phone.
After meeting with Mr Kenny in Leinster House, Mr Gilmore attended a meeting of Labour's executive body in the Radisson Hotel in Dublin.
Under party rules, Labour's central council has to ratify coalition talks.
Once the deal is completed, it will have to be approved by a meeting of the Labour membership. This convention is pencilled in for next Sunday in Dublin, ahead of the Dail sitting the following Wednesday.
The 90-minute central council meeting was described by party officials as more procedural than to set down parameters for the coalition talks.
The meeting of 60 members of the party hierarchy gave Mr Gilmore a free hand to enter negotiations with Fine Gael.
But senior party sources said there was "no great rush" to enter into coalition with Fine Gael.
"I'd be one of the biggest coalitionists in the room but nobody is chomping at the bit to go in there. There is an opinion within the party that we could go into opposition," a party source told the Irish Independent.
The first meeting of the new Labour parliamentary party, which now has a record number of TDs, will take place this afternoon in the Shelbourne Hotel, in Dublin.
It is understood it will discuss what parameters and conditions to set down in negotiations with Fine Gael there.
Mr Gilmore appointed a negotiating team made up of deputy leader Joan Burton, Brendan Howlin and Pat Rabbitte. The pair will be assisted by the party's economic adviser Colm O'Reardon.
Mr Kenny appointed finance spokesman Michael Noonan, Phil Hogan and Alan Shatter, who will be backed up by economic adviser Andrew McDowell.
Fine Gael sources said fiscal policies -- where there are substantial differences between the two parties -- remained the key priority in the talks.
"It's the elephant in the room that can't be ignored," a source said.
Fine Gael did a substantial amount of preparatory work during the election campaign by studying Labour's manifestoes and policies.
The incoming government's hopes of securing a better bailout deal moved a step closer yesterday after the EU vowed to carry on supporting Ireland's economic recovery.
There is a growing sense in Brussels that the 5.8pc average rate Ireland is paying to borrow €45bn from the EU/IMF rescue funds will hinder growth and lumber the State with an additional debt burden.
"We have a common goal for Ireland to revive its growth dynamic and succeed in ensuring debt sustainability," the European Commission economics chief Olli Rehn said.
Meanwhile, the final make-up of the Dail has yet to be completely determined with counts ongoing in Wicklow, Galway West and Laois-Offaly.
After Mr Roche's elimination, his Fianna Fail running mate Pat Fitzgerald claimed he had been abandoned by Fianna Fail after a team of lawyers and senior party officials arrived at the Shoreline Leisure Centre in Greystones to marshal Mr Roche's challenge to his original elimination on Sunday night.
He was trailing Mr Fitzgerald by just three votes on the 13th count at the time and any alteration of the decision would have resulted in his running mate's defeat.
In Laois-Offaly, Fine Gael's Liam Quinn was eliminated after a recount that he called for, but the last of the two seats has yet to be determined.
The count in Galway West could drag on to midweek with little progress being made yesterday after grinding to a halt on Sunday afternoon.
The toll was quite apparent on the weary faces of party workers, count centre staff and supporters, as the count which began in earnest at 9am on Saturday headed for its fourth day.
So far just two of the candidates -- Fianna Fail's Eamon O Cuiv and Derek Nolan of Labour -- have been deemed elected, with five in contention for the three remaining seats.
The count came to a halt at 4pm on Sunday on the request of Fine Gael candidate Fidelma Healy-Eames, who was about to be eliminated as she trailed party rival Sean Kyne by 56 votes.