Opinion in the Labour Party has hardened against another coalition with Fine Gael, with strong indications that party members will reject such a proposal.

While senior Labour figures did not shut down the prospect entirely, a number of TDs have expressed opposition to another alliance with Fine Gael.

There is also concern among some Fine Gael Ministers that bringing Labour into the fold would delay the process of government formation further, although acting Taoiseach Enda Kenny is keen to bring the party on board.

Separately, optimism was expressed by several sources last night that the various strands of talks are nearing conclusion.

Ervia, the parent company of Irish Water, was asked into meetings with senior Fine Gael figures. The future of the company and water charges is expected to be discussed by Fine Gael and Fianna Fáil today.

The talks between both parties moved from Government Buildings to the library of the provost’s house in Trinity yesterday afternoon.

The initial talks focused on government formation and how Fianna Fáil would support a minority Fine Gael-led government.

Document prepared

Both sides had requested that a document be prepared for them to inform the negotiations. The paper was drawn up by two Trinity professors, and cited examples from other juristictions on government formation.

The group of six TDs in the Independent Alliance met Fine Gael. Sources said progress could come soon in the various talks.

In Labour, Cork East TD Seán Sherlock said he was opposed to another coalition with Fine Gael, while Dublin Fingal's Brendan Ryan said he would be "absolutely amazed" if the party grassroots ratified a coalition arrangement.

Tánaiste Joan Burton and Minster for Public Expenditure Brendan Howlin were said by sources to be "very sceptical" about another coalition and it was added that the reaction from the party grassroots had been "very, very, cool".

President Michael D Higgins said he he hoped that whatever happened it would be in the best interests of the Irish people.