Deputy First Minister Martin McGuinness has accused the Government of reneging on a major commitment after it withdrew €470 million in funding to upgrade the A5 road in Northern Ireland.
First Minister Peter Robinson expressed disappointment at the decision although DUP Finance Minister Sammy Wilson said the equal sum he had set aside for the project now could go on houses, hospitals and schools.
Under the St Andrew's Agreement the two administrations were to share the £800 million cost of upgrading the 50-mile route from the Border at Aughnacloy in Co Tyrone to Derry City, which would additionally have improved access to Letterkenny and north Donegal.
Minister for Transport Leo Varadkar said today he was "politically committed" to begin work on the programme sometime before 2016 and was treating the decision as a deferral of work rather than a cancellation of the project.
"We remain politically committed to this project and expect work to commence during the lifetime of the 2012-2016 capital programme. The exact timeframe and sections to be commenced/completed during the programme will have to be worked out with
the Northern Ireland Executive in the coming months," a spokesman for the department said.
However the view in Northern Ireland was that the decision amounted to an effective abandoning of the project for the next four to five years at least. "There is a big difference between being 'politically committed' and 'financially committed' to the project," said a senior Northern Executive source.
NI Finance Minister Sammy Wilson said the Government had halted funding while expressing some understanding about how the current financial situation in the Republic had prompted the decision. He said the Government "couldn't give a commitment between now and 2016".
Mr Wilson moved to try to reassure the North's construction industry which was gearing itself up for the multi-million pound labour intensive project. "People, particularly in the construction industry, should not be alarmed at this development," he said.
"Significant capital investment resources will now be released from this project for re-allocation to other areas within Northern Ireland. The executive will now seek to bring forward to delivery stage a number of major projects in key areas such as education, health and roads," he said.
He also added that spending the money on houses, hospitals and schools rather than on the A5 road would have a greater public impact.
One senior political source in the South said that Mr Varadkar had little option as just €45 million was likely to be allocated over the next five years for capital road projects. "In the current circumstances it would have been very difficult to justify spending £400 million on a road in Northern Ireland," he said.
Mr McGuinness said he was "bitterly disappointed" at the decision and would raise the matter with the Government at the earliest opportunity.
Mr Robinson said the decision would come as a "considerable blow to the local construction industry, which has already suffered greatly during this downturn. It will therefore be our priority to identify projects that will ensure that construction jobs are supported".
The SDLP Foyle MP Mark Durkan said the decision was "hugely regrettable" although he was conscious of the financial constraints facing the Government. "We needed this project to go ahead not just for Derry but for the whole of the north-west. It is a project that is necessary for Donegal and it is also needed for Tyrone and Fermanagh," he said.
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