Northern Ireland Secretary Peter Hain was warned that the Democratic Unionist Party will not re-enter a devolved government under the same conditions as operated before the suspension of the Stormont Assembly three years ago.
DUP MP Nigel Dodds was responding to an ultimatum from Mr Hain for Northern Ireland politicians to make meaningful progress in 2006.
Nigel Dodds, DUP
The North Belfast MP said: "Peter Hain has allowed Sinn Fein a veto over political developments, stymieing any form of devolution or political movement which does not involve an executive with Sinn Fein.
"After the Northern Bank robbery and other evidence that republicans simply cannot be trusted, the Government and others refused to accept any proposal for local democracy or accountability because they wanted to wait on Sinn Fein. It's time Peter Hain woke up and smelt the coffee.
"Yes, we do want devolution and local decision-making by local Assembly members but the old-style executive devolution with Sinn Fein in Cabinet positions is not on the horizon."
In July, British and Irish Government hopes of a political breakthrough in Northern Ireland rose when the IRA announced it was standing down all its units and had ordered them to dump arms.
That was followed in September by the completion of the Provisionals' disarmament programme.
However, the Democratic Unionists have insisted confidence-building measures will have to be introduced for the unionist community before they can even contemplate going into talks to revive devolution.
Unionists have reacted cautiously to the IRA's recent moves and have insisted they want proof that the transformation in republicanism is genuine before they will consider going back into a power-sharing executive with Sinn Fein.
Officials in London and Dublin hope a report at the end of next month by the four-member Independent Monitoring Commission will demonstrate that the IRA is sticking to its word and that it will provide a springboard for talks to revive devolution in 2006.
Mr Hain warned in his New Year's message today that there would be little point in having elections to an Assembly in 2007 if there was no meaningful devolution. He said unionists needed to know republicans were serious about their commitments to totally lawful means.
But he also acknowledged that nationalists wanted to know unionists were serious about sharing power on a genuinely equitable basis.
In his end of year statement, Mr Hain said it was "essential" there was "real political movement in 2006", if the Assembly elections due to be held in 2007 are to have any meaning.
"Inertia is not in anyone's interest," he said.
Devolved government in Northern Ireland has been suspended since October 2002 when allegations were made that republicans were operating a spying operation in Stormont. Three people were arrested and recently acquitted, one of whom, Denis Donaldson, emerged as a British spy. Mr Donaldson was expelled from Sinn Fein.
Mr Hain has insisted that a spying operation was being operated by republicans at Stormont but Sinn Fein say such an operation is a creation of British spies.
In his statement today, Mr Hain said: "Every year that passes without a locally accountable Assembly working through a power-sharing executive, is a year in which the people of Northern Ireland have to live with a democratic deficit.
"Big decisions had to be taken in 2005 on education, infrastructure, health and public administration. Those decisions had to be taken by Direct Rule Ministers working in the best interests of Northern Ireland and its people."
He added: "Unionists need to know that republicans are serious about the commitments given in the Good Friday Agreement.
Northern Ireland Secretary Peter Hain
"Republicans and nationalists need to know that unionists are serious about the commitments they have given that they will share power on a genuinely equitable basis.
"They have to persuade each other that a divided past can become a shared future."
Taioseach Bertie Ahern said yesterday he hoped to see the suspension of the Northern Ireland Assembly and executive lifted in 2006, and "the earlier the better".
Mr Ahern told BBC radio that he still hoped to see a united Ireland in his lifetime, but regarded peace and stability in the North as a more important objective.
Mr Ahern and British prime minister Tony Blair are expected to start talks on the restoration of devolution with Northern Ireland's political parties following the publication at the end of January of a report on IRA decommissioning by the Independent Monitoring Commission.