A deal between two rival parties to suspend controversial water charges nudged Ireland closer to the formation of a minority government on Wednesday after more than two months of tortuous negotiations.

Fine Gael, the largest party to emerge from the February 26 election, had championed the retention of Irish Water, the utility it created as part of austerity measures in 2013.

But as part of a deal that may allow his party to return to power, party leader Enda Kenny bowed to demands by rival Fianna Fail for a suspension of the charges and the introduction of a commission to examine alternative ways of paying for water.

Kenny had previously said abolishing the organisation would be a "seriously costly and seriously historic mistake".

Following the announcement, Fianna Fail leader Michael Martin on Wednesday called the water charges "very far from being the single most important issue facing our country".

"However it is important and the handling of it in recent years represents a dramatic public policy fiasco," he added.

Fine Gael won 50 seats and Fianna Fail 44 in a 158-seat parliament in the February election that left no party with the clear numbers to rule.

Together, the two centre-right parties would have more than enough seats to form a stable government but Fianna Fail has ruled out a formal coalition.

Instead, it has offered to support its arch-rival Fine Gael if broad agreement can be reached on key policy issues.

The deal on water charges is the first significant sign of movement in weeks of negotiations.

But it remains far from certain that the two parties -- whose rivalry grew from a 1920s civil war -- can agree on enough to allow a government to be formed.

Fine Gael must also satisfy the disparate and copious demands of independent politicians, whose support it will need to form a government. These range from more facilities for local hospitals to increased broadband coverage in rural areas.

Alan Shatter, a former justice minister in the previous government who lost his Fine Gael seat in the election, told national broadcaster RTE that if a government were formed he did not expect it to last long.

"If a minority government is created, I personally don't believe it will last 12 months," he said.

"Insofar as this might be described as some sort of partnership arrangement, this is going to be a very uncivil partnership."

The introduction of the water charges as part of the country's 85-billion-euro ($92-billion) international bailout in 2010 following a spectacular property crash turned out to be an austerity measure too far for the eurozone country.

Widespread street protests, payment boycotts, public burning of bills and obstruction of water metering were used in an ongoing campaign against the new tariff, which became a major issue in the election.