World Bulletin/News Desk

Irish deputy prime minister Eamon Gilmore said on Monday he will quit as leader of the junior government Labour party, in a move that could destabilise the coalition and its austerity programme following a major election setback.

Alongside Prime Minister Enda Kenny, Gilmore led Ireland out of an international bailout last year and there have been signs of economic recovery, but it is not being felt by large numbers of voters who hammered Labour in the elections at the weekend.

The collapse in support at local and European polls prompted eight members of Labour's parliamentary party, representing almost a fifth of the grouping, to submit a motion of no confidence in Gilmore's leadership.

"In 2011, following our most successful ever general election result, I asked the party to take on the responsibility of government during the worst economic crisis in the history of the state," Gilmore told a hastily arranged news conference.

"It was a course which carried a high political risk, and Labour has paid the price for that. I believe that the work of renewing the party is best done under new leadership," he said, adding he would step down once the party elects a successor.

The next leader, who will be chosen by colleagues in early July if more than one challenger emerges over the next two weeks, will also probably become deputy prime minister.

Three years ago, Labour went into government for the first time since the late 1990s on a promise to end the previous administration's adherence to "Frankfurt's Way", an austerity plan the party said was dictated by the European Central Bank.

However the centre-left party angered supporters by pursuing the tough austerity required under the EU/IMF bailout and it captured just 7 percent of seats in the local polls, compared with 19 percent at parliamentary elections three years ago.

Ireland has taken almost 30 billion euros, or close to 20 percent of gross domestic product, out of the economy since 2008 and a further 2 billion euros of cuts are needed to reduce its budget deficit to an EU target of 3 percent of GDP next year.

Kenny, who had a close relationship with Gilmore and whose party surprisingly slumped to second place in the local polls, needs the support of Labour to push through its final package of austerity cuts in October's budget.

"Eamon Gilmore and the Labour Party have been courageous in making the collective decisions that have pulled Ireland back from the brink of economic collapse," Kenny said in a statement.

"He has assured me that the Labour Party remains fully committed to providing stable government, and to the completion of our mandate to fix our public finances."

Irish bond yields, which have fallen to record lows in recent months, were unmoved after the news, trading at about 2.7 percent for 10-year paper.

COMBATIVE PARTNER?

Labour was also on course for a wipeout in the election for the European Parliament as counting continued on Monday. It won three of the 12 seats on offer five years ago as a surge in support, dubbed the "Gilmore Gale", began to take hold.

In a separate by-election caused by the resignation of one of its members of parliament, Labour fell to seventh place as the opposition Sinn Fein party swept up the left-wing vote, as it did across local authorities in a record showing.

Gilmore, 59, who is also the country's foreign minister, took over as Labour leader in 2007 and made it the second-biggest party in the state for the first time at the last parliamentary election just months after the bailout began.

A polished orator and a former trade union official who organised marches for tax reform in the late 1970s, he paid for making a series of unrealistic election promises before going on to implement a property tax and introduce water charges.

Five of Labour's 38 MPs have defected from the party since it came to power and analysts said Gilmore's resignation would lead to it becoming a more combative coalition partner during its scheduled remaining two years in power.

"It will destabilise things, no doubt. A new leader is going to be under pressure to be continuously seen to be fighting. I'd say you'll see more crises in the future," said Eoin O'Malley, politics lecturer in Dublin City University.