Ireland's financial problems prompted it to accept a $94bn bailout package in November last year [Reuters]

Ireland's new government has confirmed it will stick to the stringent fiscal targets laid down in a European Union-International Monetary Fund bailout package.

Confirmation followed news the centre-right Fine Gael party, the winner of last week's election, had concluded a coalition
deal with the Labour party on Sunday.

The two parties had taken divergent views during their electoral campaign on the scale of public-sector cutbacks, the split between taxes and spending cuts and the time frame for cutting the budget deficit to an EU limit of three per cent of gross domestic product.

Following the deal, the parties said they would stick to the fiscal targets, but reiterated in their programme for government their plans to seek a reduction on the bailout's average 5.8 per cent interest rate.

"We will see very strong fiscal policy in the document which ties us into the parameters laid down by the EU/IMF,
notwithstanding the fact that we want to see that renegotiated," Phil Hogan, one of the lead coalition negotiators for Fine Gael, told the state broadcaster RTE.

He said the new government would target 25,000 job cuts in the public sector.

Brendan Howlin, one of the chief negotiators for the Labour party, told RTE: "We have to repair broken bridges across our European partner to build up an understanding of our position."

In November, Ireland's financial woes meant it negotiated a potential $94bn line of credit from EU and IMF donors.

A bailout became unavoidable as Ireland's largely state-owned banks found themselves unable to borrow on open markets and faced insolvency.

Fianna Fail, Ireland's then governing party, was handed a crushing electoral defeat in polls in February, thought mainly to be due to their handling of the crisis, but the new government has limited room for a change in economic policies.

Sunday's decision will likely be popular with Ireland's EU partners and draws a veil over much of the election campaigns' anti-Europe rhetoric.