(Bloomberg) — Irish Prime Minister Leo Varadkar’s party defied pre-election surveys to stay in contention to keep power, as an exit poll showed the nation’s three biggest political parties in a dead heat, with Sinn Fein on track for a historic breakthrough.Varadkar’s Fine Gael won 22.4% of votes in Saturday’s election, according to the poll, state broadcaster RTE said, confounding surveys that placed the party in third place before the vote. Sinn Fein won 22.3%, according to the Ipsos/MRBI poll of 5,000 voters, commissioned by RTE and the Irish Times, putting it line for its best-ever performance.Though the party is in the race to be the biggest party by vote share, it didn’t run nearly enough candidates to become the dominant force in Ireland’s 160-seat parliament. Fianna Fail, which oversaw the nation’s international bailout in 2010, secured 22.2% in the poll, which has a margin of error of 1.3 percentage points.On Sunday, as counting began, Fine Gael and Fianna Fail moved to rule out governing with Sinn Fein, the former political wing of the IRA. Led by Mary Lou McDonald, the party promised to spend more on housing and health, the two issues which dominated the campaign, close corporate tax loopholes and increase taxes on the wealthy.The election represents a “seismic” shift in Irish politics, Sinn Fein’s Housing spokesman Eoin O’Broin tweeted. Fine Gael and Fianna Fail, which are almost ideologically identical, have largely dominated government since the foundation of the state in the 1920s. The electoral math of a fragmented system means Sinn Fein is unlikely to lead the next government, but its rise speaks to the shifting tectonic plates that are upending traditional power structures across Europe.“The exit poll suggests a great degree of fragmentation, which will make government formation very difficult,” according to Eoin O’Malley, a politics professor at Dublin City University. “There’ll have to be significant compromise, and rowing back from election commitments, or else Ireland will be voting again this year.”Coalition Partners?It’s clear no party will come close to a majority, meaning Varadkar and Fianna Fail leader Micheal Martin will have to seek out coalition partners. The party with the most seats will be in prime position to lead the government. The Greens and Labour Party, with a combined 12.5%, may become kingmakers.The traditional divide in Irish politics runs between Fine Gael and Fianna Fail, separated by little except where they stood on the division of Ireland in 1921. Both share Brexit policies, broadly agree on economic and fiscal policy and vow to protect the nation’s 12.5% corporate tax rate. The policy gap with Sinn Fein is “too wide” to form a coalition, Enterprise Minister Heather Humphreys said in an RTE interview on Sunday. Fianna Fail lawmaker Jack Chambers said Martin should should stick by his promise to not govern with Sinn Fein, despite some party members suggesting he should keep the option open.“Our word is our bond,” Chambers said in an RTE interview.The result means Varadkar, 41, still has a fighting chance to stay in power. In the last days of the campaign, Fine Gael unleashed attacks on Fianna Fail’s economic record and questioned the democratic credentials of Sinn Fein, long considered toxic by mainstream politicians for its links to the IRA terrorist group.Policy Continuity?A Fine Gael or Fianna Fail-led government “would largely mean continuity from a financial and economic policy perspective,” said Bert Colijn, an economist with ING Groep NV. “Sinn Féin’s proposed policies would represent a significant move to the left.” While Sinn Fein’s main historical mission has been to reunite the two parts of the island of Ireland, it has morphed into a broader left of center party., with a particular focus on housing. The party will talk to anyone with a “progressive agenda,” O’Broin said. “Sinn Féin’s proposed policies would represent a significant move to the left.“We are ready for government,” he said.(Adds party comments from fourth paragraph)To contact the reporter on this story: Peter Flanagan in Dublin at pflanagan23@bloomberg.netTo contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Dara Doyle, Tony CzuczkaFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.