It also reversed its previously announced decision not to allow Sinn Fein to attend a major investment conference due to be held in Belfast in mid-December. The two moves were seen in Belfast as U-turns made by the Government in response to pressure from Washington and nationalist opinion in Ireland.
The continuing US interest in the peace process was underlined when President Bill Clinton announced the creation of a new post of ''special adviser to the President and Secretary of State for Economic Initiatives in Ireland''.
George Mitchell, retiring majority leader in the Senate, has been given the post. ''There must be a peace dividend in Ireland for peace to succeed,'' Mr Clinton said as he announced the appointment, adding: ''It's essential to create more economic opportunity in a region whose prospects have been so blighted by bloodshed.''
The original government decision to exclude Sinn Fein from the investment conference, set up by John Major, provoked anger in Irish-American business and political circles. Some US business executives threatened to boycott the conference if Sinn Fein was not there. London's position was that Sinn Fein should not attend unless it was already in talks with Britain. As a result the Government would have been unable to accede to the US pressure for Sinn Fein to attend the conference without also formally opening political talks.
The government team is to be led by Quentin Thomas, deputy secretary in the Northern Ireland Office, while the Sinn Fein delegation is to be led by the Londonderry republican Martin McGuinness. Both are believed to have been closely involved in the secret talks between the Government and republicans which came to an end a year ago.
The new talks, which will be held at Stormont, will cover demilitarisation, weaponry held by the IRA and the entry of Sinn Fein into the political processes. Mr McGuinness said yesterday his party was ''prepared to be constructive and imaginative in the search for a political resolution of the causes of conflict''.
James Molyneaux's Ulster Unionist Party received the news with equanimity, but the Rev Ian Paisley's Democratic Unionists said they would boycott the conference if Sinn Fein were there. A spokesman said: ''The Government has embarked on a surrender road with the IRA.''
Despite a conviction among some senior Tory MPs that Washington had played a part in yesterday's announcement, Downing Street last night ''categorically'' denied that the decisions were taken as a result of US pressure.
Officials insisted that the key factor had been, as always, the requirement to have the support of mainstream opinion in Northern Ireland.
But Sir Patrick Mayhew, the Northern Ireland Secretary, who said on Wednesday that it would be ''premature'' to invite Sinn Fein to the conference before the process of bringing Sinn Fein into the political process had begun, announced in the Commons yesterday that the Government had decided to invite members of the economic committees of both Belfast and Derry city councils to attend the
''They will, of course, include Sinn Fein if they choose to come,'' he said.
Face to face, page 2
Leading article, page 17
How two decisions were reversed in one day
Wednesday, 11.30am: Mayhew says Sinn Fein is barred from economic conference
12 noon: Gerry Adams tells press conference he will protest to US
4pm: Sir John Wheeler says Government-Sinn Fein talks will start 'within days'
Evening: Whitehall says Wheeler is wrong: talks will be later
Late evening: Pressure from US for Sinn Fein presence at conference
Thursday, 10.20am: Journalists told talks with Sinn Fein start next Wednesday