The DUP has rowed back on its demands over the devolution of policing and justice powers to Northern Ireland as republicans warned a major crisis was looming.

Deputy First Minister Martin McGuinness of Sinn Fein said the political process would be in “deep trouble” if a deal is not agreed by Christmas.

But fears of an immediate crisis eased last night after DUP leader Peter Robinson (pictured) said retaining the police full-time reserve was not a pre-condition for agreement despite a senior colleague claiming it was a deal-breaker.

Mr Robinson said: “We have made it very clear that in relation to policing and justice there is but one pre-condition — the necessity to have public confidence in the devolution of policing and justice powers.”

He said that if the reserve is phased out in keeping with wider police reforms, his party believed frontline policing must be protected and former reservists should have a chance to play a future role in the service, where administrative posts are to be created.

Leader of the hardline Traditional Unionist Voice (TUV) Jim Allister hit out at the DUP and said: “The police reserve will go, (but) sweeten it by making some of them office boys. It is an appalling shame.”

Meanwhile, the future of the wider political talks between the DUP, Sinn Fein and the Government on agreeing the transfer of justice powers from Westminster to Stormont remained unclear.

The offer of a £1 billion Government package to fund the move has so far failed to persuade the DUP.

Yesterday a crisis appeared possible after Mr McGuinness and Mr Robinson held talks in Belfast with the Irish government's Foreign Affairs Minister Micheal Martin.

At a subsequent Press conference, which Mr Robinson did not attend, Mr McGuinness said: “What absolutely is an imperative is to have an agreement on the transfer of power, and a date for the transfer of power, before Christmas. I have to say, if it slips past Christmas, we are in deep trouble.”

The DUP has said community confidence must be secured before a deal and demanded the scrapping of the Parades Commission, moves to allow former security force members to have access to protection weapons and the maintenance of the police full-time reserve.

Last Friday Chief Constable Matt Baggott confirmed that, in line with the wider Patten Commission reforms of the police service, he was to proceed with the scrapping of the 300-strong full-time reserve.

He said plans to recruit civilians would free-up deskbound officers and boost frontline policing.

But yesterday the DUP's Jeffrey Donaldson said the move would make it impossible to agree to the devolution of policing and justice.

Mr Donaldson said: “We believe that in the absence of resolving this matter (the reserve) and some other issues like parades and PPWs (personal protection weapons for former security force members) and so on, that the public confidence simply isn't there to allow devolution to proceed.”