Irish government deal extended to avoid adding to Brexit "chaos"

By Graham Fahy and Padraic Halpin

DUBLIN (Reuters) - Ireland's main opposition party agreed to extend an expiring cooperation deal with Prime Minister Leo Varadkar's minority government into 2020, to avoid what it called a spreading of the "political chaos" gripping Britain.

Varadkar's Fine Gael party formed a minority government in 2016 under a "confidence and supply" deal with the opposition Fianna Fail party, which agreed to abstain from opposition-driven votes over the course of three annual budgets.

The parties began talks on a possible extension after the last of those budgets was passed in October.

Fianna Fail leader Micheal Martin said on Wednesday that a fresh election now would be the right thing in "normal times", but because "no one has the faintest idea" what course Brexit will be take in coming weeks and months, it was in the national interest to avoid political uncertainty next year.

"This is why Fianna Fail will extend a guarantee that government will be able to operate throughout 2019. This will in turn allow the holding of an election early in the following year," Martin told parliament.

"Fianna Fail is determined that the political chaos we see in London will not be allowed to spread to Ireland."

Martin said that the decision to guarantee support for the party's oldest and fiercest rival, which it has swapped power with since the foundation of the state almost a century ago, was reached reluctantly and would not please everyone in his party.

Although Varadkar sought earlier this year to extend the agreement until mid-2020, many analysts suspected he would instead capitalise on Fine Gael's increased popularity by calling a snap election this year.

However the uncertainty created for Ireland and its open economy by Britain's chaotic path towards leaving the European Union - underscored by a challenge to Prime Minister Theresa May's leadership on Wednesday - put paid to the prospect of an election in the near term.

"I think the timing of this announcement is important. At a time where there is clearly a lot of uncertainty about Brexit and the British political system, the Irish political system has responded in the way that it should," Deputy Prime Minister Simon Coveney of Fine Gael told reporters, predicting that the next election would take place in the first half of 2020.

"We will have now certainty for at least another year and probably more to ensure that we can prepare the country for whatever may unfold in the context of our closest neighbour leaving the European Union at the end of March."

(Writing by Padraic Halpin; Editing by Peter Graff and John Stonestreet)