British and Irish Leaders Bid to Break Deadlock in Belfast

London: The British and Irish prime ministers engaged in marathon talks into the early hours of Friday in a bid to break political deadlock in Northern Ireland's fragile unity government.

British leader David Cameron and his Irish counterpart Enda Kenny have cleared their diaries until Friday afternoon for the talks, amid increasing concern over whether the joint administration of unionists and nationalists is at risk of collapse.

The Democratic Unionist Party and Irish nationalist Sinn Fein party are deadlocked over welfare reform, as well as issues such as flags and parades that remain deeply divisive 16 years after a landmark peace deal.

If agreement is not reached on welfare, Belfast faces about £200 million ($314 million, 254 million euros) in government penalties for not implementing reforms.

It has already had to ask for an emergency £100 million loan to balance its books this year, and there were signs London was losing patience.

"The solution to the problems of Northern Ireland cannot be a big cheque," warned the British government's Northern Ireland secretary Theresa Villiers. "That money is not there."

Both Sinn Fein and the DUP have warned that a deal must be reached before Christmas, or it will be postponed until after the British general election in May 2015.

"People across Northern Ireland want their politicians to get together... and we have got to demonstrate we can resolve these issues," Cameron said as talks began. "I am always an optimist."

Kenny said that the issues at stake were important for Northern Ireland, as well as for its relationship with his government.

"Hopefully we can reach a conclusion," the taoiseach said.

Similar talks lead by US diplomat Richard Haass collapsed in December of last year without agreement.