There were fears on Tuesday that Northern Ireland could be entering a new phase of violence stoked by dissident Republicans to sabotage the peace process after a powerful car bomb exploded near a courthouse in the town of Newry — about 50 km from Belfast — causing widespread damage to property.

Police said it was a “sheer miracle'' that nobody was killed or injured in the explosion which was heard miles away. It followed a telephone warning that a bomb was about to go off in the next half hour, giving police barely minutes to clear the area.

“We could have been looking today at multiple deaths. It was certainly big enough to have caused multiple casualties to anyone passing,” said Police Chief Superintendent Alisdair Robinson.

The attempt, on Monday night, was widely condemned across the political divide with mainstream Unionist and Republican parties setting aside their differences to denounce attempts to reignite violence.

Prime Minster Gordon Brown's official spokesman said: “Such acts are entirely unrepresentative of the views of the vast majority of people in Northern Ireland ... we will not allow a tiny minority to turn the clock back.” Sinn Fein, which shares power with the Democratic Unionist Party, called it an attempt to “drag us backwards and ensure we have the British army back on the streets.”

In recent months, dissident Republican groups have stepped up their violent campaign but Monday's explosion was believed to be the most serious incident of its kind since 2000. It came days after a mortar bomb was found near a village police station.

Authorities denied that they had become complacent. A senior police officer said they continued to take the “dissident threat'' seriously and had put “many more police officers back on the streets'' besides investing in new anti-terror capabilities.

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