Patrick Daly described how Martin McGonagle - alleged to be a high- ranking INLA officer - told him he would like to 'blow the English bastards to pieces'.
Mr Daly, who is in his forties, said he had been a police informer since the mid-1970s and an MI5 agent since moving to Galway in 1989. He gave information about the Official IRA in the Bristol area, the Irish Republican Socialist Party and the INLA.
During his evidence, Mr Daly, who spoke with a strong Irish accent, was visible to the court but was shielded from the media by screens.
Mr McGonagle, of Limerick, and Liam Heffernan, also 31, from Belfast, were arrested during an alleged attempt to steal explosives from a Somerset quarry in February. They deny conspiring to cause explosions, plotting to steal explosives and possessing a .357 Sturm Ruger pistol.
Mr Daly and his family have since been given new identities and 'substantial financial compensation'. He told the jury how a man called Hugh Torney, said to be the INLA's chief- of-staff, asked him to reconnoitre quarries in south-western England and find a safe house.
Details of meetings with Mr Torney and other INLA members were given by Mr Daly to his police and security service handlers immediately afterwards. As a result, MI5 helped him to select a quarry and substitute the real explosives with false ones; they also picked a house which they equipped with listening devices.
When the INLA team of Mr McGonagle, Mr Heffernan and Anthony Gorman arrived, police were waiting to film them. Parts of recordings were played to the court but were largely incomprehensible because of background noise and interference.
In December 1992, Mr Torney told Mr Daly to reconnoitre army recruitment offices. 'He said he wanted to kill another soldier - the sooner the better,' Mr Daly said.
A month later, Mr McGonagle allegedly told him the explosives theft plan was being revived: 'He said it was vital to get the explosives to boost the morale of the organisation' and to carry out assassination attempts on loyalists.
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