AS THE IRA army council sets about organising bombs for other British cities and the loyalist paramilitaries consider retaliation in Dublin, both governments, are desperately searching for a political formula that might defuse the situation.

The prospects are bleak. Four days ago, Mr Gerry Adams set out the terms on which he believed the IRA might reconsider its decision speedy, substantive talks equality of treatment of the parties and no preconditions. Yesterday, on the heels of another bomb, he declared the peace process to be over and said it would have to be reconstructed from the ground up.

The situation was sliding out control. The hawks in the IRA were effectively dictating a return to the twin track policy of "the Armalite and the ballot box" and Sinn Fein appeared helpless to prevent it.

There are those who say Mr Adams is now a spent force that his authority inside and outside of the republican movement was blown away by the decision of the new army council to break the ceasefire. The army council, they say, is firmly in the republican driving seat and Sinn Fein is becoming increasingly irrelevant.

It may be too bleak an assessment: Mr Adams and his closest supporters have shown enormous political skill and considerable courage over the past number of years in their efforts to wean republicans away from the use of physical force. What they did once, they can repeat. And nobody has yet assessed the strength or the determination of the new army council.

The Fianna Fail leader, Mr Bertie Ahern, spelled it out bluntly yesterday. "We must persuade the IRA that they are embarked on a road that leads to political disaster for the whole country," he said.

"They must be persuaded to give back their confidence to their political leadership and to recognise that exclusively political methods are the only way forward for the long haul. The military tradition offers no hope for the future," he said.

Within Fianna Fail, there is a growing reluctance to meet the leadership of Sinn Fein while the bombing continues. The situation was moving very fast, one source said.

The worst scenario would be a resumption of full scale war by the IRA in Britain and the North and the loyalists bombing Dublin. It would be impossible to contain a bombing campaign, he said, and some "very hard talking will be done and harsh things said when Mr Ahern meets with Mr Adams later this week".

THE same air of doom and gloom permeated Government thinking as officials sought to devise a compromise package with their British counterparts which might bring about all party talks. The priority, Dick Spring said, was to reinstate the peace process.

But as the Taoiseach and the Tanaiste met at Government Buildings to review the elements that might be fused to create an acceptable path towards all party talks, the difficulties facing them were immense. Even if the unionists could be brought to the negotiating table, Sinn Fein might not be accommodated while the IRA's campaign continued.

As that bombing campaign intensified, the Government reviewed internal security and put in place arrangements to guard against IRA activities, and possible loyalist retaliation, in the Republic.

Members of the Anglo Irish liaison group are due to meet today to explore ways of rebuilding the peace process. And George Mitchell will visit London and Dublin tomorrow and Thursday as chairman of the arms decommissioning. As of now, no role as an intermediary is envisaged by the two governments for Mr Mitchell. And Ahern feels Mr Mitchell may still have a vital role to play, there is a recognition within Fianna Fail that this may not be the best time.

Ms Mary Harney and Dr John Alderdice have concluded in recent days that the resumption of the IRA's campaign is the clearest possible signal for all democratic parties to proceed to negotiations without Sinn Fein. The door should be left ajar for any party which wished to join the negotiations, on a democratic basis, at a later stage, they said.

BUT the governments are not yet ready to turn their backs on Sinn Fein. That would mean, one source said, an acceptance that violence would continue. Instead, Ministers and officials are making determined efforts to forge an agreement which could resuscitate the peace process and lead directly to all party talks. Because of IRA violence, they have the added complication of providing for Sinn Fein's participation without compromising fundamental principles.

The ingredients in use are still the same as those mentioned last week: proximity talks, an electoral process, a possible referendum and US involvement. It is hoped that, next week, John Bruton and John Major will be able to sign up to a new initiative. But the prospects for a new departure, in the midst of violence, are miserable.