Intensive negotiations were taking place last night to devise a formula enabling Sinn Féin to call a special ardchomhairle on policing this week.
Such a breakthrough, if possible, in turn should trigger a special party ardfheis on policing in early to mid-January.
As British prime minister Tony Blair and Taoiseach Bertie Ahern closely monitored the talks, a senior Government source said a critical point had been reached in determining whether the policing deadlock between Sinn Féin and the DUP could be broken before Christmas.
"It is too close to call but there is a real significance to how the next 24 hours pan out. I think we are very close to unlocking the problems of a model and a timeframe for transferring policing and justice powers to a restored Northern executive," he said last night.
A meeting between DUP leader the Rev Ian Paisley, and Mr Blair was being pencilled in for today, although one source said that encounter would take place only if it appeared clear that a formula on policing mutually acceptable to the DUP and Sinn Féin was found.
The Assembly policing sub-committee met again at Parliament Buildings, Stormont yesterday.
However, the more significant and intense negotiations took place elsewhere on the Stormont estate yesterday involving Northern Secretary Peter Hain and his officials in separate negotiations with senior DUP and Sinn Féin politicians such as Dr Paisley and Peter Robinson, and Martin McGuinness and Gerry Kelly.
Dublin and London believe that a fine-tuned version of a DUP proposal has the potential to end the DUP/Sinn Féin policing standoff on when policing and justice powers would be transferred to the Executive.
Under this proposal an Executive minister for justice would be elected on a 70 per cent cross-community party vote in the Assembly. In reality this means that the DUP could veto a Sinn Féin MLA taking the ministry. But equally it would also mean that Sinn Féin and the SDLP could veto a DUP minister taking the post.
Therefore, to achieve the necessary cross-community vote it would mean that the candidate would most likely come from the Ulster Unionist Party, the SDLP or Alliance.
The DUP, obviously, accepts this reality, although Sinn Féin has concerns and suspicions about the 70 per cent voting threshold and other elements of the proposal.
One DUP source said that its proposal to the policing subcommittee was its opening position. It is understood that the current intense negotiations revolve around moderating elements of the proposal and the British government providing guarantees that the DUP will not be allowed exploit its position to the disadvantage of Sinn Féin.
The potential in a streamlined proposal, the governments believe, is that it should provide a timeframe and a model for transferring policing and justice to the Executive, as Sinn Féin is demanding.
"Sinn Féin remains in intense discussions in an effort to sort all of these matters out," said a senior Sinn Féin source last night.
All parties agree that time is of the essence. If the ardchomhairle is not called in the coming three days then it could be into the first or second week of January before an ardchomhairle was called. As under Sinn Féin rules it takes two weeks from an ardchomhairle before a special ardfheis could be called, this would mean it could be about the end of January before an ardfheis might take place.