The Coalition is well and truly shaken after a stinging result for Labour and a bad day for Fine Gael. Whatever about the fate of Tánaiste Eamon Gilmore, efforts to remould the programme for government and reshape the Cabinet are now likely to be hastened. But will it work?

Both Gilmore and Taoiseach Enda Kenny find themselves at something of a crossroads. While setbacks are inevitable in any mid-term election, the force of the rebuke from voters greatly increases the stakes for both parties. Whether they can retrieve their composure and common sense of mission is in question. This will have implications for their capacity to settle another budget this autumn and work together into the final year of their mandate.

Meetings on Wednesday of Fine Gael and Labour TDs will be official forums for internal debate, but the postmortem is already under way. Within a dejected Labour, the sense remains that the result is worse than expected. Within Fine Gael, TDs say assertive action is required to regain the political initiative and arrest the drift seen since the start of the year.

If an immediate move into talks between the parties might smack too much of panic, developments can be expected shortly. Labour’s election wounds are deeper than Fine Gael’s, but a balance will still have to be struck between the needs of both parties when it comes to the reshuffle.

Political revamp The challenge is to freshen the public face of the Coalition and bolster its authority. While that would necessitate radical change, Kenny's instinct would be conservative. The Taoiseach might have to go further than he would wish. That too is risky, for reshuffles always leave disappointment in their wake.

Whether Gilmore faces an immediate challenge to his leadership remains unclear. It is a given by now, however, that he wants out of the Department of Foreign Affairs. Labour has designs on the jobs and enterprise brief held by Richard Bruton, but Fine Gael has no intention of yielding. Indeed, its guiding principle is that there should be no new division of portfolios with Labour.

While the likely departure for Brussels of Minister for the Environment Phil Hogan frees up one portfolio, there are other strains. Fine Gael has long been unhappy with Joan Burton's performance in the Department of Social Protection. Similarly, Labour and many in Fine Gael are displeased with Minister for Health James Reilly.

Ditching Reilly poses a challenge, for he is deputy leader of Fine Gael. That said, Kenny was ruthless in disposing of Alan Shatter and Frank Flannery. Some of his own Ministers believe he should replace Reilly with Leo Varadkar.

Then there is the matter of the programme for government. There is no mystery to the themes for discussion: an increase in disposable income by widening the higher income tax band, a reworking of the medical card review and measures to boost house-building. With Fine Gael in pursuit of tax cuts, the quid pro quo for Labour might be a hike in the minimum wage.

Financial strictures All

fine in principle, but the Coalition’s problems centre on the financial strictures within which it must operate. Any promise of help for the hard- pressed in the Government programme would face an early test in budget 2015, to be agreed by mid-October.

The obvious difficulty remains that the Government is legally bound to achieve a budget deficit below 3 per cent next year. Opinions vary as to whether that requires a €2 billion retrenchment – which now seems like a political impossibility – or €500 million from the water tax. Either way, it will be a huge challenge to deliver an appreciable uplift in take-home income while attaining the deficit cut.

Resolving these tensions is essential if the Government is to turn the narrative in its favour. Voters appeared unmoved by ritualistic complaints about the mess the Coalition inherited from Fianna Fáil in 2011.

These elections serve to alter the relationship between Fine Gael and Labour: the parties could not form a government if the results were repeated in a general election. Thus their inherent codependence is not as it was, even if the argument is made that voters behave differently in second-order elections. There’s no comfort in that for former councillors and MEPs.