Northern Secretary Peter Mandelson said it is "pure luck" that last night's bomb blast in Derry did not kill a large number of people.
A suspected "barrack buster" mortar forced the evacuation of hundreds of local residents from their homes.
Speaking as the British Government began talks in London with the Northern parties, Mr Mandelson said no-one will understand if the solution that is within grasp is allowed to fall away.
Meanwhile, Sinn Fein's Martin McGuinness has insisted the IRA had no involvement in the Derry incident.