Ireland 'is back in business' as voters punish Fianna Fail

An election outcome of seismic proportions has put the Republic of Ireland on course for a new coalition government made up of the two parties who were principal winners in the contest.

The landmark election opened the way for a whole new era – though a daunting and difficult one – by decimating the once-proud Fianna Fail party which has dominated Irish politics in living memory. Voters punished the party for presiding over the collapse of the Irish economy which led to a humiliating €85bn bail-out from the IMF and European institutions.

This loan means the new administration will start out not with a clean sheet but with a huge loan to repay and with a detailed programme of restrictions over government policy for years ahead.

One of the first acts of Enda Kenny, the Fine Gael leader who is set to become prime minister, will be to seek easier terms than those imposed on the outgoing government. "We are not going to cry the poor mouth," he said yesterday, "but I look for co-operation, consensus and support across Europe."

He described the terms of the bail-out as "a bad deal for Ireland and a bad deal for Europe", adding: "We want to restore our pride at home and abroad. Our country is back in business."

Fine Gael did not achieve an overall majorityand it is expected to open negotiations with the Irish Labour party, its traditional coalition partners, on forming a new government. The Irish political system has much experience with coalitions, and is quite at ease with the concept: it does not regard them as a source of instability.

Mr Kenny declared: "I intend to send out a clear message around the world that this country has given my party a massive endorsement to provide stable and strong government with a clear agenda. That's absolutely critical."

The Labour leader, Eamon Gilmore, made it obvious yesterday that his party hoped to receive approaches from Fine Gael. Together the two parties are expected to have 100 or more of the Irish parliament's 166 seats after their best-ever performances.

Sinn Fein also did well, more than doubling its Dail representation with its president, Gerry Adams, and other candidates polling particularly well. The number of independents and members of small parties was, at 14, the highest for more than half a century.

These striking advances were made at the expense of Fianna Fail, which had a historically poor result, dropping from more than 70 seats to around 20 as voters blamed it for the economic morass. Since the 1920s it has won at least one seat in every constituency. Today, 25 constituencies of the 43 are Fianna Fail-free zones, causing debate on when, if ever, the party can hope to stage a recovery.

It suffered a series of "Portillo moments" as former ministers lost their seats. The casualties included the deputy prime minister Mary Coughlan and tourism minister Mary Hanafin who lost their seats in an election in which women candidates did not fare well.

Fianna Fail was almost wiped out in Dublin, where the other big parties prospered. Brian Lenihan, the former finance minister who retained his seat against the trend, admitted: "The government has taken a hammering at the polls. I will do everything I can to rebuild the party and to be responsible opposition in the Dail."

The Green party, which was in coalition with Fianna Fail, lost all its seats. Most of the independents elected stood on anti-government tickets, and some of them will provide a left-wing voice absent from the last parliament.

While it is technically possible for Fine Gael to form an administration with the support of independents, there is a strong national mood for an emphasis on stability after months of near-chaos.

This means that Fine Gael and Labour are expected to open talks this week on agreeing a formal coalition.