DUBLIN -- The Labour Party walked out of talks on forming a new Irish government with Fianna Fail early Tuesday when a row over the handling of a child abuse case returned to haunt the former partners.


The breakdown of coalition talks seemed certain -- and certain also to create a vacuum that would slow the embryonic Northern Ireland peace process at a crucial phase.


Britain, Ireland's partner in a year-old drive to end the conflict, is due Friday to hold exploratory talks with the Irish Republican Army's political wing, Sinn Fein, in Belfast.


Labour leader Dick Spring said he was calling off talks with Fianna Fail after fresh allegations about how the party bungled its handling of extradition warrants for a suspected pedophile priest.


He made his announcement just hours before parliament was due to reconvene to choose a new prime minister to succeed Albert Reynolds, who was forced to resign over the same case three weeks ago.


The election of Fianna Fail leader Bertie Ahern as prime minister, with Spring his deputy, had seemed a formality until the Irish Times ignited fresh controversy Monday with new allegations about the child sex abuse case.


It said Reynolds had asked his former Attorney-General, Harry Whelehan, to resign over the issue the day before he went to parliament and exonerated him from any blame.


The report virtually accused Reynolds of lying to parliament. Reynolds, currently acting prime minister, was expected in Dublin early Tuesday after flying back from a European security conference in Budapest.


Political sources said it seemed unlikely that Labour and Fianna Fail would patch up their differences and were skeptical about the chances of Labour entering a so-called Rainbow Coalition with opposition parties led by Fine Gael.


Former minister Michael Noonan, of Fine Gael, said he did not see how Fianna Fail could try to form a coalition with any other party after the latest allegations.


"Their ministers collectively or individually misled parliament and as a consequence are no longer suitable for government," he said.


Political sources said they expected a marathon parliamentary session on the child abuse case on Tuesday night with Fianna Fail on the ropes.


As a result of Labour's move, Fianna Fail might abandon attempts to form a coalition and ask President Mary Robinson to dissolve parliament and call elections, probably in mid-January, political sources said.


Labour brought down the previous government when it pulled out in protest at Whelehan's promotion to High Court President.


It alleged his office had failed to deal with extradition warrants for Father Brendan Smyth, a Norbertine priest, for over seven months and said this disqualified him from high office.


Smyth was jailed for four years when he returned to British-ruled Northern Ireland to stand trial on multiple child abuse charges over a 24-year period.


Reynolds initially defended Whelehan but retracted his defence 24 hours later and said Whelehan had misled him about details of the case.