The deal may have foundered, but hope for power sharing in Northern Ireland lives on

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The stage was set for the deal to end all deals in Northern Ireland. The idea of Ian Paisley, the godfather of rejectionist unionism, agreeing to share power with Gerry Adams, the public face of militant republicanism, would have been unthinkable once. Yet that is exactly what we came so agonisingly close to witnessing yesterday.

The stage was set for the deal to end all deals in Northern Ireland. The idea of Ian Paisley, the godfather of rejectionist unionism, agreeing to share power with Gerry Adams, the public face of militant republicanism, would have been unthinkable once. Yet that is exactly what we came so agonisingly close to witnessing yesterday.

An agreement on the institutions of devolved government had been concluded between the Democratic Unionist Party and Sinn Fein. An accommodation on the vexed issue of policing in the province had been reached. Virtually everything was in place for a historic compromise between these two extremes of the Northern Ireland political spectrum. But Mr Paisley, seeming to confirm the worst expectations he so often provokes, balked at the last minute. What would have been a mighty step towards permanent peace was not taken for want of a few photographs.

The photographs in question would have shown decommissioned IRA weapons. Mr Paisley and his Democratic Unionist Party insist that no deal can be done unless the IRA produces visual evidence that the guns and explosives which have fuelled paramilitary republicanism for 30 years have been put out of commission for good. The leaders of Sinn Fein, the political representatives of the IRA, consider this an unreasonable demand. They argue that the IRA is perfectly happy to decommission its remaining weapons, but that such a photograph would be used as a propaganda tool by the DUP. They fear it would be paraded as evidence of the IRA's humiliating "surrender".

The inquests on this stillborn deal have focused on when the idea of producing photographs was first raised. The DUP insists it was always part of the deal. Sinn Fein claims they never agreed to it. The British and Irish governments, who brokered the agreement, are keeping their counsel on the matter. But there is a case for arguing that the question of which side was ultimately responsibly for the breakdown of this agreement is actually less important than the question of where the peace process goes from here.

In this respect, the outlook is not so bleak. It is now clear that the IRA has given up the armed struggle. The DUP has indicated that it is willing to work with Sinn Fein in a devolved administration, and both parties are hungry for political power. Frustrating as yesterday's events were, an accommodation is still a realistic proposition.

It is easy to lose sight of how far Northern Ireland and its principal political players have come since the Good Friday agreement. Only seven years ago, IRA graffiti was proclaiming its intention to surrender "not one bullet" and Mr Paisley was campaigning for a "No" vote in the devolution referendum. Now those two extremes are on the verge of sitting down together in government.

The extent to which short-term calculations influence the politics of Northern Ireland must not be underestimated. Both Sinn Fein and the DUP always had a clearly defined fall-back position in the event that these talks failed. Their respective rivals, the SDLP and David Trimble's UUP are in a sorry state. Mr Adams and Mr Paisley anticipate making big gains in the Westminster elections expected next May. This will increase their respective influence when devolved government returns. It is arguable that it was always in the interest of both groups to wait until May before committing to a deal.

It is possible to regard the latest talks as something of a dress rehearsal for a deal that will ultimately be concluded next spring. After May, there will be no elections for some time. That means there is no immediate means for each party to maximise its bargaining position. It will also mean that both sets of leaders will be less sensitive about being accused of weakness by extremists within their own movements.

So, despite the bitter taste left by yesterday's disappointment, it is still realistic to feel a degree of optimism about the future of Northern Ireland.

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