LOYALIST and RUC sources say the UDA and UVF are considering three options in response to IRA provocation.
Firstly, the Combined Loyalist Military Command (CLMC) can declare the ceasefire of October 1994 to be over. Secondly, they can selectively respond in kind to IRA operations on a tit for tat basis without admission of responsibility. Lastly, they can honour the ceasefire.
The current mood swings between the second and third options, although an IRA "spectacular" such as the murder of a loyalist politician, would give pre eminence to the first choice.
"Another IRA action could blast the loyalist ceasefire out of the water," one well informed source said with uncharacteristic use of dramatic language.
A senior RUC source said the discipline of the loyalist paramilitaries was surprising.
"Frankly I am amazed the CLMC ceasefire has lasted as long as it did. We expect PIRA to be disciplined, but not the loyalists," he explained.
Nonetheless the RUC source, like those who represent or have access to the UVF, UDA and Red Hand Commando, warns that the situation is in "grave danger" of sliding back to the violence of the pre ceasefires period. Ultimately, what the loyalists do next depends on the IRA, they say.
Incidents like the bomb alert at Belfast Castle, the IRA gun attack on RUC officers as they were protecting DUP secretary Mr Nigel Dodds and his wife Diane, the bombing of Thiepval barracks in Lisburn, and other explosives finds all bring forward the day when loyalist patience - will finally snap.
Mr David Ervine of the Progressive Unionist Party (PUP), which is linked to the UYF, and Mr Gary McMichael of the Ulster Democratic Party (UDP), associated with the UDA, insist that the CLMC is still intact, but under some pressure.
Loyalists, as well as security sources, are however in no doubt that it was the UDA which was responsible for the booby trap bomb which injured Ardoyne republican Mr Eddie Copeland, and the foiled booby trap car bomb attack on Derry republican Mr Liam Duffy.
"That was bad, but at least it has to be said that it wasn't a case, of Roman Catholics being targeted as they walked the streets. I think it was the loyalists saying, to the IRA, `if you are going to be selective in your attacks then so will we'," said an observer with access to the loyalist leadership.
A UDA source said the loyalists attacks in Belfast and Derry should be viewed "as warning shots across the bows of the IRA". The attack at the Royal Belfast Hospital for Sick Children, despite the IRA denial, was viewed as an attempt to kill Nigel Dodds as he visited his sick son.
"That had to be a deltberate provocation that was the straw that broke the camel's back," he added. "But there is no desire within the loyalist paramilitaries to escalate the violence. They would probably let things sit if the IRA was relatively quiet."
He added: "The attack on Eddie Copeland was a message to the IRA that we are still around, that we can get into republican areas, that we are still knocking around, and that the loyalist ceasefire is not inexhaustible.
"There is no strong desire in loyalism to go back to war. But if the IRA were to do something that was beyond the Pale I don't know where that would leave us."
Loyalists representing the UVF and UDA have denied there is, any split on strategy between the two organisations. It is noted however that during thy Drumcree standoff it was dissident UVF members who engaged in actions - including the murder of Michael McGoldrick from Lurgan - while the UDA kept calm, which is in contrast to the current situation where the UDA is planting bombs while the UVF is silent.
Loyalists say it is becoming increasingly difficult to pacify UDA and UVF members, when confronted by an ever increasing rate of IRA actions. Much of the energies of senior UDP and PUP politicians, as well as UDA and UVF leaders, has been devoted to easing the grassroots tensions, and maintaining discipline.
"But it is becoming harder and harder to sell the peaceful argument, particularly when the RUC have told us that senior members of the UDP and PUP are being targeted by the IRA," said a senior UDP figure.
"It is difficult to convince them to remain calm when they can hear republicans saying they want to negotiate, when at the same time they are trying to kill the people they say they want to negotiate with," he added.
