The Labour Party and Democratic Left are on course to form an alliance or unite as early as the end of this year.
A first phase of talks between the two parties concluded last week and a "mission statement" for a new "left force" in Irish politics has been drawn up. More detailed talks will begin next month.
Labour has told Democratic Left that it is prepared, if necessary, to hold a special conference before the end of this year to approve any agreed outcome to the talks. Democratic Left's annual conference takes place in mid-November in Dun Laoghaire and would be expected to approve a deal before the special Labour conference.
Most Labour sources spoken to at the weekend said they believed a single party of the left was now the inevitable outcome of the discussions between the parties. A number of Democratic Left sources also share this expectation, but others in the party say a merger is not inevitable and that a substantial number of party members want Democratic Left to maintain its own political identity in an alliance with Labour based on a common policy platform.
Some Democratic Left members fear a merger would amount to Labour in effect absorbing DL, which has four TDs compared to Labour's 18. In last year's general election Labour received 10.4 per cent of the vote and Democratic Left 2.51 per cent.
The Labour and Democratic Left leaders, Mr Ruairi Quinn and Mr Proinsias De Rossa, have had a number of meetings over the past two months to discuss the negotiations, which have been conducted by senior figures from each party since last May.
Mr De Rossa said last night: "There are no foregone conclusions or done deals. There is a strong desire in both parties to retain their own identities. There must be respect for traditions and positions on both sides."
While Mr De Rossa would not speculate on the outcome of the discussions, which he said had come out of a Democratic Left initiative, he hoped that both himself and Mr Quinn would be able to agree in principle by the end of September that the talks were worth continuing.
The central point in the "mission statement" which has been drafted defines the purpose of the new "formation" as being to bring about the establishment of a left-led government. While the parties have not formally agreed this statement, there are understood to be no remaining differences on it. A final version of the document was drawn up last week by Mr De Rossa and passed to Mr Quinn.
The two parties have agreed to set up a permanent research foundation or "think-tank" which would regularly produce discussion documents and policy ideas for the new party. The Labour and DL party executives have approved this idea and an interim board of the research foundation - comprising three members from each party - is expected to be formed in the autumn.
Labour's talks team is led by the party's deputy leader, Mr Brendan Howlin TD, while Mr Eamon Gilmore TD is heading the DL team.
The two parties agreed in May to hold talks about setting up a "new political formation". Mr De Rossa, who was previously a public opponent of a merger, said at that time that he would not "rule anything in or out" in relation to a union between the parties.
In the discussions the Labour Party is understood to be insisting that if the parties merge the new entity should continue to be called the Labour Party and should retain its present structures. Labour favours making provision to guarantee representation for Democratic Left members on the party's ruling bodies once a union takes place.
It is also understood that Labour wants a new united party to be organised in the Republic only, meaning that Democratic Left would have to break with its small membership in Northern Ireland.
Mr De Rossa has just completed a two-week tour of his party's constituency organisations to discuss the talks with Labour.
The negotiations next month will focus on the thorny issue of relations in individual constituencies and how to minimise friction over Dail candidates and frontbench portfolios. Contentious constituencies include Dublin North-West, Dun Laoghaire, Wicklow and the two Cork city constituencies.
Sources in both parties emphasise that substantial progress will be needed in September if the talks are to conclude successfully before the end of the year.