Postmasters have entered talks with An Post on a voluntary severance package that could close hundreds of post offices.

If agreed, such a deal would bring years of politicking over the future of the postal network to an end.

The business stands to lose £83 million (€101 million) by 2005 and An Post has long argued that 900 of its 1,900 post offices are not viable.

However, the Irish Postmasters' Union (IPU) has resisted closures for more than a decade, arguing that the "social" dimension of the post office service could not be replaced.

The union's participation in the severance talks marks a significant turnaround and follows the Government's refusal in July to pay An Post a subsidy to keep loss-making offices open.

That decision followed a report by industrial relations consultant Mr Phil Flynn, who is chairing the talks between the IPU and An Post. According to the report, ideas for new business "did not appear" strong enough to eliminate losses.

IPU general secretary Mr John Kane yesterday said the discussions were progressing.

Stating that the proposed deal was centred on postmasters at non-automated post offices, he said: "There's a potential 800 or 900, but nothing like that will go."

Mr Kane was unwilling to speculate on the likely take-up of any such deal. Informed figures at An Post believe up to 500 postmasters with the lowest revenues might accept a package.

Mr Kane said the IPU had already rejected two draft deals in the past five weeks and expected An Post to table another before Christmas.

If agreed, the deal will involve a lump-sum payment to salaried postmasters. They will also be offered the option of retaining the business as an agency, whereby they will be paid a fee per transaction.

Crucially, this would allow the Government to claim that it is not closing post offices per se.

Where agencies are not taken up, the Government has indicated that they may become available to other retailers.

Again, this will enable the Government to claim that it has not diluted its commitment to State-wide postal services.

The structure of the proposed deal is in line with the Government decision last July rejecting subsidies as an option to keep rural post offices open.

The Government has advised An Post to "expedite" the deployment of such agencies and to implement the cost reductions.

The State company was also told to pay a 12 per cent pay rise to postmasters and it was granted a £10 million capital injection to pay for a "reform package".

A Government press release in July said the £10 million would pay for a 12 per cent pay rise to postmasters, but three informed people said the expression "reform package" in the Government decision was understood to be a reference to the severance deal now under discussion.

Indeed, it is understood an application for "State aid" clearance, to the EU competition directorate general, also made this clear. An EU decision is expected soon, according to sources.

Non-automated post offices generate only small revenues, and have been excluded from network development programmes such as a recent deal to provide services for AIB customers at An Post outlets.

If the £10 million in equity was divided among postmasters at 450 such outlets, each would stand to gain about £22,222.

According to Mr Kane, an initial offer of six weeks' pay per year of service had been rejected.

Some IPU members earned £100-£110 per week, he added.

Means of extending the provision of Government services through the network are also under discussion, he said.

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