Fianna Fail has lost a quarter of its allies in the European Parliament amid a row over alleged kickbacks and illegal gun-running to Angola.
Six French MEPs have left the Union for a Europe of Nations (UEN) in protest at the presence in the group of Mr Charles Pasqua, a former French minister accused of benefiting from the arms sales.
The walkout cuts the group's voting strength from 30 to 24 and leaves the far-right Italian Alleanza Nazionale, with nine seats, the largest party in the group.
A Fianna Fail spokesman said the party's six MEPs planned to stay within the UEN despite the allegations against Mr Pasqua, which he said were groundless.
The scandal over illegal arms sales to Angola led last year to the arrest of Mr Jean-Christophe Mitterrand, the son of the late French president. French investigators have found that an arms dealer paid more than £300,000 to Mr Pasqua's righthand man and senior Africa aide in the early 1990s, Mr Jean-Charles Marchiani.
They suspect the illegal arms deals may have been made under an agreement negotiated by Mr Pasqua and President Eduardo dos Santos of Angola.
French media have suggested that some of the money may have found its way into the coffers of Mr Pasqua's RPF party.
Fianna Fail confirmed yesterday that it will join Mr Pasqua's party and its other European Parliament allies in setting up a new group, the Alliance for a Europe of Nations. Mr Pasqua has said the new group will oppose attempts to create a federal Europe.
But a Fianna Fail spokesman said the primary purpose was to qualify for European Commission funding and to create alliances with parties in central and eastern Europe.
With just 24 out of 626 seats, the UEN is one of the smallest groups in the parliament. The centre-right European People's Party, which includes Fine Gael, has 232 seats and the Socialists, who include Labour, have 181.
