There is “no way” Fine Gael in opposition would support a Fianna Fáil minority government on a case-by-case basis, one of the party’s senior figures has said.

Minister for Health Leo Varadkar said Fine Gael will not back a government led by Micheál Martin and including a number of Independents or smaller parties.

Fine Gael with 50 seats and Fianna Fáil with 43 seats are the only two parties that could realistically form a government.

Fianna Fáil and Fine Gael will intensify their negotiations with Independents and smaller parties this week to try to win support for either Enda Kenny or Mr Martin’s candidacy for taoiseach.

Barry Cowen, a member of the Fianna Fáil negotiation team, said there was an onus on whoever loses to support a minority government from opposition on an issue-by-issue basis where policies can be agreed. Failure to do so would cause an election, he said. “I would hope there would be respect from the largest party that has been left behind,” he said. “If they don’t, they are pressing the button for an election. Let it be on their heads if there is an election.”

Mr Varadkar disagreed. “We’re the larger party,” the Dublin West TD said. “There is no way we could support a Fianna Fáil-led minority government, no matter how many Independents they sign up.”

Effectively 51 seats

Fianna Fáil won 44 seats in the election but effectively lost one when party TD Seán Ó Fearghaíl became Ceann Comhairle. Fine Gael has 50 seats and Tipperary Independent Michael Lowry has said he will vote for Mr Kenny in the Dáil vote for taoiseach.

Against the backdrop of the continued political manoeuvring, there is growing concern about the amount of money the next government will have to spend given a potentially serious deficit in the health service.

The Irish Times understands that the HSE has warned the Department of Health that it could record a deficit of €300 million to €500 million by the end of the year. This would potentially take up almost the entire amount of “fiscal space” available to the next government for 2017.

It is understood that a confidential letter to the Department of Health last December warned of a risk that it could have an end-of-year deficit of up to €500 million.

Challenge, not deficit

Government sources last night argued the HSE did not convey a likely deficit but highlighted the financial challenge it would face if, for example, anticipated savings did not materialise. It also maintained it was far too early in the year to predict how the HSE’s finances would play out.

Fine Gael and Fianna Fáil negotiating teams are expected to meet Independents and smaller parties in the days ahead, with both hoping to woo rural non-party deputies.

Fine Gael is expected to table a package of measures on rural Ireland that will put “flesh on the bones” on what was outlined in the party’s manifesto, such as commitments on post offices, rural transport and the renewal of towns and villages.

Fianna Fáil sources said its rural policies are also outlined in its manifesto, including measures such as a minister for rural affairs of cabinet rank and the extension of rural broadband. A party source said the days of “throwing money” are gone, and pointed to the estimated €500 million available for 2017.

It was acknowledged that the likeliest way of drawing out the support of certain Independents would be the threat of an election rather than any policy commitments.