Just when it looked as if the tide might have turned for Fine Gael, arising from a resounding victory in the Cork by-election, the party has found the water level is still falling.

The direction from which the challenge came was totally unexpected. John Bruton and his advisers had confidently expected the Coalition Government to stick to its crude, pre-election promises by cutting income tax rates and rewarding the better-off.

But when Charlie McCreevy stood up in the Dail on Budget day and performed the most astounding political metamorphosis of recent years by introducing a system of tax credits that favoured the low paid, all the Fine Gael leader could do was gape.

Not since 1982 and Mr Bruton's own failed budget attempt had the matter of tax credits been seriously addressed. And nobody had expected the present Government, elected on a strict, tax-cutting platform, to embrace the concept.

But that's Bertie Ahern for ya: the most devious, the most cunning, the most ruthless of them all.

A new national agreement had to be negotiated in 1999 by the Government if industrial unrest and excessive pay demands were to be avoided. And the preliminary skirmishing would overhang the June local elections. So, two objectives could be secured - a pay deal encouraged and the opposition discomfited - if generous tax concessions were made in the Budget. And a bonus might be secured by driving a wedge between Fine Gael and its former rainbow partners.

John Bruton had used every opportunity to court his former partners in the Dail. There was a warm, mellow note in his voice when he spoke of the past and anticipated the future. Life with the rainbow was truly the only way back to government for Fine Gael.

And then the Labour Party and Democratic Left decided to merge. What did it mean? Was the future to be a two-tone government? Or should the Green Party also be courted? By the end of the year, Fine Gael was still marking time.

The "special relationship" the Fine Gael leader had forged in government with Proinsias De Rossa and Democratic Left may not survive the merger. And rumours about Ruairi Quinn's good relationship with Bertie Ahern are certain to fuel paranoia within Fine Gael.

What could John Bruton offer as bewitching adhesive to the new and expanded left-wing party now that Fianna Fail had stolen his just society/taxation clothes?

Child care, housing, hospital waiting lists, transport/traffic and farm incomes were identified as vote-catching issues in the aftermath of the Budget. But "big-picture politics", in terms of the economy, Northern Ireland and European matters, was firmly in the Government's grip.

It was a case of waiting and hoping the Moriarty or Flood Tribunals, or some other investigation, would produce a scandal to confound the Government. It would need to be big and messy if the Progressive Democrats were to be detached from Fianna Fail and the Labour/Democratic Left amalgam frightened off.

Hoping for something to turn up will not be enough. Imagination and political creativity are required. For the huge gap Fianna Fail opened up on Fine Gael last April, when Mr Ahern negotiated the terms of the Belfast Agreement, has continued to yawn.

From a position where Fine Gael had consistently scored an average of 25/26 per cent in public support for a three-year period, its following suddenly dropped to 20 per cent. And it stayed there this year, right through until October. At the same time, Fianna Fail's support jumped from the mid 40s to a base of 57/56 per cent.

THOSE figures promise a Fianna Fail breakthrough in next June's local elections and the possibility of a later Dail majority. And the fact they were fashioned out of a successful initiative on Northern Ireland should be of particular concern to Fine Gael.

John Bruton's visceral distaste for Sinn Fein and for militant republicanism has dropped him into trouble on many occasions. It was no different in 1998, before and after the Belfast Agreement.

At the height of disagreement between Sinn Fein and the Ulster Unionist Party over the appointment of Sinn Fein to the shadow executive last August, Mr Bruton supported the position adopted by David Trimble and argued in favour of prior decommissioning, even though that was not explicitly provided for in the Belfast Agreement.

Mr Bruton has never allowed political sensitivity to get in the way of his analysis. As far as he was concerned, Government policy should not be based on wishful thinking, fudge or illusion. His reading of the IRA's position led him to believe the organisation had no intention of decommissioning its weapons. Therefore, it had to be confronted rather than facilitated. No democratic government, he said, should be asked to contain cabinet members who enjoyed the support of an illegal army.

The timing and the content of his speech ran counter to public sentiment, which was still firmly supportive of Bertie Ahern's incremental efforts in persuading republicans of the benefits of peace.

It was only after President Clinton took the Fine Gael leader to one side during his summer visit to Dublin that Mr Bruton amended his position to talk about the need for "parallel progress".

Mr Bruton's willingness to see issues from the unionist perspective is engaging but it can also be a serious political handicap. Albert Reynolds famously addressed him as "John Unionist" in the Dail. And, when he was Taoiseach, Bertie Ahern accused him of being unhappy with his role as leader of nationalist Ireland.

He sometimes applies linear thought in a situation more suited to lateral reasoning and produces conclusions that alienate both republicans and nationalists. His strident criticisms of Mary McAleese as a "Sinn Fein-endorsed president" during last year's presidential election contributed, in the view of some Fine Gael activists, to the election of the Fianna Fail candidate.

In all of that, he has done no more than seek to reinvent Fine Gael as the "law and order party" which at the foundation of the State rejected Sinn Fein's physical force republicanism. But time has moved on and old formulae may have lost their potency.

Still, there is plenty of life in the old party. Having suffered from the sudden and tragic death of Hugh Coveney in March, Fine Gael bounced back in October to win the Cork South Central by-election in great style under the banner of his son, Simon Coveney.

That sweeping by-election victory provided Mr Bruton's leadership with vital impetus at a time when the party was flagging in the opinion polls and was desperately seeking a springboard for next year's local elections.

Since then, the Budget has taken some of the wind out of Fine Gael's sails. But party morale is still high as a result of the byelection win. And there is a quiet determination to add to its stock of young, ambitious politicians in the coming local elections.

It's always hard for an opposition party to make gains when the economy is growing rapidly. And John Bruton has particular difficulties as the political landscape undergoes significant alterations.