This article is more than 5 months old

This article is more than 5 months old

The coronavirus crisis has spurred government formation talks in Ireland between Leo Varadkar’s ruling Fine Gael party and its old rival, Fianna Fáil.

Both parties lost seats in a general election last month that marked a revolt against the political establishment, but parliamentary arithmetic and the coronavirus pandemic have prodded them towards an unprecedented coalition.

After weeks of exploratory talks the two parties issued an agreed statement on Wednesday night that cited the need to form a strong, stable government to help Ireland recover from an emergency that is set to affect the health of thousands and plunge the economy into a deep recession.

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“They are working to develop a programme for government that provides stability and majority support in the Dáil,” the statement said, referring to the Irish parliament’s lower house.

A coalition would mean Varadkar, currently caretaker taoiseach, would stay in power and rotate the office with Micheál Martin, the leader of Fianna Fáil, during an expected four- or five-year term.

The two parties would still be short of a majority in the 160-seat chamber, so would need to bring onboard independent TDs (MPs), the Greens or small leftwing parties to form a ruling coalition – a courtship that could last weeks.

Fine Gael and Fianna Fáil, centrist rivals that have dominated Irish politics for a century, have ruled out a deal with Sinn Féin, which won a quarter of the vote in the 8 February election, making it the most popular party in a fractured political landscape.

On Thursday, the Dáil met for 12 hours to debate emergency legislation on new measures to slow coronavirus contagion and to cushion workers, the self-employed, renters and companies from economic devastation.

Varadkar said preparations for a no-deal Brexit had left Ireland better prepared for Covid-19, as some of the stark challenges facing the country came into focus on Thursday.

Officials are working on establishing temporary morgues to deal with expected deaths, it emerged. “We are still in the preparation phase to deal with the surge when it comes,” Elizabeth Canavan, assistant secretary for social policy at the Department of the Taoiseach, told a press briefing.

The Economic and Social Research Institute, a Dublin-based independent research organisation, said the economy could contract by more than 7% this year, and unemployment could jump to 18%, if restrictions to contain the pandemic remained in place for 12 weeks. Before the crisis, Ireland’s economy was the EU’s stellar performer and on track for 4% growth.

The Republic of Ireland has recorded 1,564 cases of Covid-19 infection and nine deaths. Northern Ireland has reported 241 cases and 10 deaths.

In the election, voters punished Varadkar and his party for a housing and healthcare crisis, but in recent weeks the taoiseach has won plaudits from across the political spectrum for his handling of coronavirus.