The tendency to revert to crisis in the peace process could dissipate private business and international goodwill, Northern Ireland's Minister for Finance, Mr Mark Durkan, said yesterday.

Speaking after a meeting with his counterpart in the Republic, Mr Durkan said Northern Ireland could not afford to be politically dysfunctional and think it would not pay any economic price for it.

He said Northern Ireland would not be able to sustain the same level of support and interest from the private sector and from politicians and business people in the Republic, the EU and the US if it could not maintain political stability.

"Clearly, the context of the peace process has led to a stronger sense of purpose in economic activity and that's not just in the private sector but also in terms of the quality of public sector activity and the social economy," he said.

He said business organisations, trade unions and voluntary bodies were clearly happier talking to local people in the assembly and executive who were in a much more informed position to take the harder strategic decisions that need to be take. Mr Durkan said the strength of sterling was impacting on export performance and the economics of the Border regions and that several government departments were trying to adopt measures which would mitigate these problems. However, he indicated this was not going to be easy because there was little fiscal discretion and using significant public expenditure would not be particularly effective anyway.

Mr Durkan confirmed that proposals relating to pilot regions with special rates of corporation tax have been put to several departments and consideration was being given to them.

He described the meeting with Mr McCreevy as a courtesy call and said they discussed the workings of their own departments and some potential areas of cross-Border co-operation.

Mr McCreevy and Mr Durkan are scheduled to meet again in February at a meeting of the North South Ministerial Council. At that meeting they are scheduled to discuss an EU programmes Implementation body.