By Ian Graham
BELFAST (Reuters) - Northern Ireland could be set for a fresh election or a return to direct British rule of the province after one of the two main parties negotiating to form a new government said on Sunday that talks had run their course without success.
The British province's nationalist and unionist parties have until Monday to form a new power-sharing government following snap elections this month or risk decision-making being taken back to London for the first time since 2007.
Sinn Fein, the province's largest nationalist party, said that no substantive progress had been made on any of the key issues responsible for the impasse and that it would not support nominations to form a new regional executive.
"This talks process has run its course. Sinn Fein will not be supporting nominations for speaker or the executive tomorrow," Sinn Fein's Northern Ireland leader Michelle O'Neill told reporters.
"Sinn Fein is still intent on honoring our mandate and agreements made. We want to see the institutions restored, but when we said there will be no return to the status quo, we meant it."
Sinn Fein had collapsed the previous government and surged to within one seat of the Democratic Unionist Party (DUP) at the March 2 election to deny pro-British unionist politicians a majority in the regional assembly for the first time since Ireland was partitioned in 1921.
Britain's Northern Ireland minister James Brokenshire responded by urging the parties "even at this stage" to agree to work to form an executive, a position backed by Ireland's foreign minister.
If there is no agreement by Monday's 1500 GMT deadline, Brokenshire will have to decide whether to call another election -- the third in less than a year -- or to legislate for a return to direct British rule of the province, something he has repeatedly said he is against.
Irish Prime Minister Enda Kenny has raised the prospect that the parties could be given more time to form a new devolved administration, but Britain's government has not proposed an extension and Sinn Fein is against such a move.
The leader of the smaller nationalist SDLP party said it was clear that an agreement will not be reached in the time left and that Brokenshire should allow for the process to be reconvened.
(Editing by Padraic Halpin and David Goodman)