Ireland's dominant centre-right parties to continue post-election talks

By Graham Fahy

DUBLIN (Reuters) - The leaders of Ireland's two largest centre-right parties, Fine Gael and Fianna Fail, held preliminary talks on Tuesday and said they agreed to meet again in a bid to break the deadlock created by an inconclusive parliamentary election on Feb. 8.

The two parties and left-wing nationalists Sinn Fein each secured just under a quarter of the 160 seats in the Irish parliament, and two of the three will need to cooperate to form a government.

As both Fianna Fail and Fine Gael have ruled out sharing power with Sinn Fein, the former political wing of the Irish Republican Army, the most likely options are a coalition of the Fianna Fail and Fine Gael or a second election.

Irish Prime Minister Leo Varadkar said in a statement that "preliminary talks" had been held between his Fine Gael party and Fianna Fail and that the two had agreed to meet again "at a future point."

But in a sign that a lot of work remains to reach agreement between the two historic rivals - who were on opposite sides of Ireland's civil war a century ago and have never shared power - Varadkar said his party continued to prepare to enter opposition.

Fianna Fail leader Micheal Martin, who has effectively ruled out all options other than a tie-up with Fine Gael, was more positive, saying that he thought it was time to begin to discuss a possible programme for government.

"I did put to him that we were willing to engage and that we are of the view that both parties should commence discussions... on an exploratory basis in terms of policy, in terms of a programme for government," Martin said.

Asked if Varadkar had rejected the proposal, he said "he didn't reject anything."

Varadkar has said he would need a further mandate from his parliamentary party to open negotiations on a policy programme.

Martin last week ruled out working with Sinn Fein and on Tuesday said it was "very very unlikely" that Sinn Fein could form a government with the remaining parties.

A surge in support for Sinn Fein on the back of a housing crisis effectively broke a century-old duopoly between Fine Gael and Fianna Fail. Fine Gael won 35 seats to the 37 each held by Fianna Fail and Sinn Fein.

Sinn Fein would have taken more seats if it had fielded more candidates and would be very well placed to improve its position in a second election, analysts have said.

All sides predict it will take several weeks to form a government. Martin said it was likely that Varadkar - who remains prime minister until his replacement is appointed - would travel to Washington in mid-March for St. Patrick's Day celebrations.

(Writing by Conor Humphries; Editing by Mark Heinrich, William Maclean)