Northern Ireland Secretary Theresa Villiers
Northern Ireland Secretary Theresa Villiers has expressed optimism about the outcome of cross-party negotiations headed by a former US diplomat on divisive flags and parades issues.
Richard Haass is holding talks with Stormont politicians on resolving contentious issues left over from the peace process, which have prompted serious rioting in Belfast.
Ms Villiers told MPs at Westminster that she fully supported the discussions.
"I certainly hope very much that they will succeed. Northern Ireland continues to pay the price of these divisions, it continues to face a situation where decisions on flags can lead to protest and public disorder," she said.
"There is generally an economic price that is attached to continuing tensions around these issues.
"It would be very positive for Northern Ireland, for the quality of life and for the economy, if progress could be made on those issues and if it is not it would hold back progress on building social cohesion and the economy."
Ms Villiers told the Northern Ireland Affairs Committee the Haass talks were a sign of the maturity of the devolved administration in trying to fix problems itself but could not outline any plan B should they fail to produce agreement by the end of year deadline.
She said: "I am pretty optimistic. Dr Haass has set himself a timetable, he is a very impressive individual, he is determined and there have been a lot of positive signals from local parties that they are willing to make progress."
She added that Westminster legislation may be required if agreement can be reached on parades, flags or dealing with the past.
Weeks of loyalist rioting followed the decision almost a year ago by Belfast City Council to restrict the number of days the Union flag can be flown from Belfast City Hall.
Scores of police officers were injured after they intervened to prevent pro-British protesters causing disruption.
That violence, which disrupted the Christmas economy in Belfast city centre, was followed by a restive marching season.
After a loyal order procession through a contested part of North Belfast was diverted, loyalists held angry demonstrations. Wider violence saw some using swords, bricks and scaffolding to attack police.
Dr Haass was appointed to lead talks designed to find a lasting solution to contentious disputes amid polarising community relations.
Unionists have pressed for the abolition of the Parades Commission, which adjudicates on controversial marches, and also expressed anger about republican "glorification" of the past through a parade commemorating IRA men killed by their own bomb.
Ms Villiers said: "It is important for those proposals and suggestions to come from within Northern Ireland and from the Haass process itself.
"If it does not reach a conclusion then the current system will continue."
DUP MP for North Antrim Ian Paisley Jnr said: "That looks like a bribe that says to the unionist majority who have no truck or time for the Parades Commission, 'if you don't take the medicine from Richard Haass you will continue to take the medicine from the Parades Commission which you disrespect'."
The Northern Ireland Secretary is arranging talks with Stormont's smaller parties in mid-January on a range of issues after the deadline for Mr Haass to produce recommendations.