The Government has called for "the utmost calm and restraint by all sides" following the decision of the Parades Commission to permit an Orange parade along the Lower Ormeau Road in Belfast.
The rule of law must be fully respected on the Lower Ormeau "as is the case on the Garvaghy Road", it stated.
Government sources last night said they could see little prospect of a breakthrough in the Drumcree standoff.
In spite of "exhaustive efforts" up to yesterday, involving Downing Street, the Taoiseach's office, the Minister of State, Mr Eamon O Cuiv, and senior Department of Foreign Affairs officials, there was little hope of any positive developments emerging.
According to a Government statement yesterday evening, the application for a parade on the Lower Ormeau Road was "widely and rightly seen as being very sensitive, in particular given the tense situation across Northern Ireland generated by the standoff at Drumcree and the absence of local agreement.
"On this, as on all other contentious parades, the Government believe that local accommodation is the best outcome. While such an accommodation, disappointingly, has not proved possible, the Government believe that the rule of law must be fully respected on the Lower Ormeau, as is the case on the Garvaghy Road." The commission's decision must be implemented with impartiality and sensitivity. "We also firmly hope that any public dissent from the Parades Commission determination will be carried out in a peaceful and dignified manner," the statement added.
Calling for calm and restraint, it said everybody should keep in mind that the genuine and long-term interests of all the people of Northern Ireland were best served "through the institutions and potential of the Good Friday Agreement".
Sources said it appeared at one point on Saturday that some progress would be made after residents' representatives on the Garvaghy Road suggested that agreement could be reached on allowing the parade down the road next year in return for consultation on the wider concerns of nationalists in the Portadown area.
Among these were social and economic issues, intimidation, the provision of shopping facilities and public housing.
In spite of pressure from the British government to engage in dialogue on this, the Orange Order would not enter discussions. The Orangemen also declined the use of intermediaries, sources said.
The Democratic Left leader, Mr Proinsias De Rossa, said it was vital that the Drumcree impasse be resolved before the weekend. The weekend of July 12th was always a period of high tension and failure to resolve the deadlock would inflame passions.
"It is tragic that local intransigence on both sides is putting at risk all the progress that has been made over the past few years. Is there nobody involved in this dispute who is prepared to push past the hardliners on both sides to safeguard the interests of the wider community in Northern Ireland?" he asked.