Leo Varadkar says he would consider a grand coalition with Fianna Fáil after the next election.

The Taoiseach and Fine Gael leader suggests he won't rule out doing business with Micheál Martin to form the next government.

Enda Kenny proposed a grand coalition between Fine Gael and Fianna Fáil in 2016, but the idea was rejected by the current opposition party in favour of a confidence and supply deal.

Speaking today, Mr Varadkar observed: "Any general election is going to depend on the results.

"Obviously my intention and expectation is that we win the election... we form a government and we head a coalition.

"I'm certainly not ruling out any future arrangement with Fianna Fáil - either a confidence and supply or a coalition."

'Every election is different'

On Newstalk Breakfast his morning, the Taoiseach admitted that Fine Gael will face a dogfight to hold on to power when voters go to the polls.

“Every election is difficult,” he said.

“We were only 1% and four or five seats ahead of Fianna Fáil in the last election so that was fairly tight too.

“I think the two big parties Fianna Fáil and Fine Gael are fairly evenly matched.

“People will be deciding essentially whether they want me to be Taoiseach or Micheál Martin.

"Whether they want the next Government led by Fine Gael where we continue to go forward or whether they want to go back to Fianna Fáil plus other parties.”

Favourite

He made the comments after he lost his status as the bookies favourite to lead the next Dáil.

Mr Varadkar said it is "normal enough in politics for opinion polls to go up and down."

"Obviously when you first become Taoiseach you have a honeymoon period and that ends and that is inevitable - but you go back up again as well," he said.

"Polls go up and down, bookies odds change and that is not something that concerns me too much."

Prudent party?

He accepted that Fine Gael’s reputation as the ‘party of fiscal rectitude’ has taken a hit in recent times – but insisted the party has a “better story to tell than most people are hearing.”

Earlier this week, the Irish Fiscal Advisory Council (IFAC) warned that the country had gone “back to where we’ve been in the past” due to the Government’s failure to build up enough of a budget surplus to deal with a potential economic downturn.

The council said it had been warning the Government to run budget surpluses for the last three years; however the Government failed to take advantage of opportunities to do so.

Economy

Mr Varadkar said it is “important to listen” to the council’s advice – but said running a country is not like running a business.

“If you look at the facts, when I became Taoiseach and Paschal Donohoe became Finance Minister, we had a budget deficit,” he said. “We now haw have a budget surplus.”

“What the fiscal council is saying is that we should have a bigger surplus – even though we are one of the few countries that actually has a surplus.

“I think economists often look at these things the way you would look at running a business or a balance sheet.

“I am actually running a country and the consequences of running a bigger surplus would be building fewer houses; it would mean less home helps; it would mean longer waits for the Fair Deal.”

You can listen back to Leo Varadkar's full Newstalk Breakfast interview on Brexit, housing and the next election here.