A FURIOUS row broke out between "big beast" Fine Gael and Labour ministers at a Cabinet meeting last week in relation to the hugely contentious Anglo Irish Bank promissory note payment due in March, the Sunday Independent can exclusively reveal.

Finance Minister Michael Noonan rounded on Communications Minister Pat Rabbitte during what was described by authoritative sources as "angry exchanges".

At one point Mr Noonan is said to have snarled at Mr Rabbitte that the promissory note issue was "none of your business", but Mr Rabbitte is said to have declared that the issue is "fundamental to the future of the Government".

Taoiseach Enda Kenny intervened at the height of the row to also turn on Mr Rabbitte and support the finance minister, who has staked his reputation on securing a deal to restructure the arrangement before March 31 – when more than €3bn is due to be paid.

Meanwhile, in Fine Gael this weekend, TDs are preparing to do battle this week with Labour on another front – a demand to legislate for the X case on abortion.

Minister of state Lucinda Creighton has made it clear that she will resign from her position if any proposed legislation is "too liberal", according to informed sources.

An estimated 30 Fine Gael TDs and senators fear Mr Kenny will "cave in" to demands on abortion as a "sop" to placate Labour after Fine Gael was widely seen to have "won" the Budget argument.

The toxic fallout from the Budget remains far from contained, however: the Sunday Independent this weekend also learned that Labour senator James Heffernan is "extremely likely" to vote against the social welfare measures next week.

The latest and most serious row yet between the Coalition partners comes at a time when the divide between Fine Gael and Labour remains red raw after one of the most controversial Budgets in living memory.

Within the wider Labour movement there is widespread speculation that Eamon Gilmore's leadership is at issue in the wake of the decision of party chairman and TD Colm Keaveney to effectively walk away from the parliamentary party last week.

After almost two years of negotiation, Mr Noonan said in October that the Budget next year – a further €10 child benefit cut is planned – will be less "onerous" if the Anglo promissory note arrangement can be restructured.

The Cabinet exchanges flared when discussion turned to the unilateral declaration by Mr Rabbitte that the Government was not going to make the promissory note payment in March.

Mr Rabbitte told The Week In Politics last Sunday: "We didn't pay the promissory note this year and as far as I'm concerned we're not going to pay it next year. It's as simple as that."

The intervention by Mr Rabbitte, regarded as a strong advocate of "Government before party", caused surprise not only at Cabinet but also at a wider level in Europe.

At the Cabinet meeting, Mr Noonan is said to have told Mr Rabbitte that the issue was "none of your business", but Mr Rabbitte is said to have retorted that each minister "has a stake" in the secretive negotiations involving the finance minister in Europe.

While he seemed to be initially taken aback by the sheer severity of Mr Noonan's onslaught, Mr Rabbitte is said by reliable sources to have "given as good as he got".

At one point the communications minister is said to have reminded the finance minister that the outcome of the negotiations was "fundamental to the future of the Government".

The suggestion that the future of the Government may be at stake is said to have "softened" Mr Noonan's "cough"; he is then said to have "gracefully backed down" and to have declared he was not going to lose a friendship of 30 years on the issue.

However, one source said the row was of "unprecedented bitterness, far more serious than anything that has gone before"; another said "it was real ding dong stuff – Noonan went off on a long harangue about how he was deeply upset over the serious undermining of his efforts"; another source added: "Enda was furious with Rabbitte. He complained bitterly."

As well as the abortion issue, the Government's attention will be refocussed on the Budget again this week when the Social Welfare Bill comes before the Senate.

Yesterday, James Heffernan, a Labour senator from Limerick, told the Sunday Independent: "I have life-long Labour men and women who flew the Labour flag in Limerick, when it was not easy, resigning their membership. I must respect and be guided by their decision."

Another widely known Labour politician at local level yesterday also told this newspaper that he had decided to "tactically remain" in the party "so I can support Keaveney". He added: "This is going to come down to the leadership issue."

The Labour "show of strength" at Cabinet on Tuesday was party informed by the underlying threat to the future of Mr Gilmore from what is seen as traditional Labour "grassroots" intent to wrest control of the party from the dominant influence of former Workers' Party members.

Mr Gilmore is said to be taking "legal advice" on the stated intention of Mr Keaveney to remain as Labour chairman, a decision which will, in effect, buy the Labour leader time to assess his position.

Yesterday, Mr Keaveney told the Sunday Independent that he intends to "protect" his position as chairman "like a lioness protects her cubs"; he said the party's "grassroots" had "shrouded" him with support which he described as overwhelming.

Mr Keaveney also railed against what he called the "undignified" comments of the Labour hierarchy since Thursday.

Yesterday, neither "traditional" Labour nor former Workers' Party sources were confident enough to predict the outcome should Mr Gilmore force the chairmanship issue before the Labour national conference in October.

Taoiseach nominees to the Senate, Jillian Van Turnhout, Marie Louise O'Donnell, Katherine Zappone and Mary Ann O'Brien, are also anticipated to vote against respite care and child benefit cuts.

In that event, the fate of the Budget in the Senate would rest with four Labour senators – James Heffernan, John Whelan, Denis Landy and John Kelly.

If two were to vote against, the social welfare measures would be defeated and returned to the Dail.

The repercussions for Labour leader Mr Gilmore would be seismic, however.

Mr Gilmore last week sanctioned an all-out attack on Colm Keaveney, the Labour TD and party chairman, who voted against Budget cuts to respite care in the Dail on Thursday.

The manner and tone of the official Labour response to Mr Keaveney's decision has caused deep unease among "grassroots" Labour members, many of whom respect and even support his decision.

Even Labour TDs and senators who did not support Mr Keaveney's decision were left uneasy at the intervention of Mr Rabbitte, who launched a deeply personal attack on the Galway East TD and other dissidents, who he described as selfish and politically narcissistic.

Sunday Independent