The deterioration in relations between nationalist and unionist politicians in Northern Ireland was sparked by a decision to limit the flying of the Union flag over Belfast City Hall, Deputy First Minister Martin McGuinness has said.
Marking the 20th anniversary of the IRA ceasefire, the Sinn Fein chief said Democratic Unionists and Ulster Unionists have retreated into a coalition with rejectionist unionism and loyalist paramilitaries.
Mr McGuinness said it was borne out of "anti-democratic protests" over the flag row and the refusal of unionist leaders to accept compromise and a democratic decision.
"The decision to restrict the flying the flag to designated days is, of course, a compromise position. A compromise which Sinn Fein was prepared to support," he said.
"But the unionist parties have been incapable of accepting this compromise and have railed against this democratic decision.
"And it is that failure, the failure to accept a democratic decision, the failure to work towards compromise, the rejection of dialogue and negotiations to resolve contentious issues which is now at the heart of the problems that we are facing."
Mr McGuinness challenged unionist leaders to take initiatives similar to his handshake with the Queen and involvement in royal events to improve relations between the communities.
The former IRA commander said: "I have personally tried to understand and reach out to the unionist population not least in my engagements with Queen Elizabeth.
"But reconciliation is not a one-way street. Unionist leaders need to engage in similar initiatives."
The IRA's landmark ceasefire of August 31 1994 still sharply divides opinion in Northern Ireland 20 years on.
At the time was met with victory celebrations in republican areas across the region, while unionists leaders declared the Provos had accepted they had been defeated.
In an address at the Rath Mor centre in Londonderry, Mr McGuinness called on dissident republicans to give up their struggle.
"There can be no return to the violence and repression that scarred this society for so long," he said.
The Sinn Fein chief added: "The real threat to the political institutions is stagnation and the absence of progress. The real threat is the retreat of political unionism from dialogue, compromise, agreement and reconciliation. And none of this is about abandoning sincerely held political beliefs or positions."
Reflecting on the peace process and the historic ceasefire, Mr McGuinness paid tribute to former Irish taoiseach Albert Reynolds who died just over a week ago.
He said he was set apart through his formal engagement with Sinn Fein and claimed that the Irish establishment traditionally enforced policies of isolation, censorship and repression until Mr Reynolds' time in power.
The Sinn Fein leader, joint leader of the Northern Ireland institutions with the DUP's Peter Robinson, offered a damning assessment of the breakdown in relations at Stormont over the last year.
He said Mr Robinson threatened to collapse the institutions three times in six months - over IRA on-the-runs, the contentious Orange Order parade past the nationalist Ardoyne shops in north Belfast and welfare cuts.
"The rejection of dialogue and negotiations has spread like a virus to all other issues, including those already agreed such as the development of the Maze/Long Kesh site. Similarly with welfare cuts," Mr McGuinness said.
The Northern Ireland deputy leader accused the DUP of backing an "anti-poor agenda of the Tory millionaires in London" and said it was Sinn Fein's position that cuts to welfare will hit both nationalist and unionist communities.
Mr McGuinness called for the US to reassert its influence over Northern Ireland politicians and said leaders in London and Dublin also need to promote talks on the issues of flags, parades and dealing with the past.
The historic IRA ceasefire came after years of behind the scenes talks between some leaders of the terror group and the British establishment.
It prompted a similar announcement from loyalist paramilitaries within several weeks in 1994.
The Provos returned to violence in February 1996, when it blew up London's docklands.
It called another ceasefire in July 1997 - a move that paved the way for Sinn Fein's inclusion in political negotiations that culminated in April 1998 with the signing of the historic Good Friday Agreement.
Ulster Unionist peer, Lord Empey, marked the anniversary by reiterating that the ceasefire was an acceptance by the IRA that their campaign had failed.
"At the time of the ceasefire the Ulster Unionist Party was extremely suspicious," he said.
"We assumed - based on the evidence of previous encounters between the Government and the IRA such as in 1972 - that it was probably politically driven and the product of some kind of deal.
"There was also a suspicion that the IRA was using the ceasefire as a political bargaining tool and to some extent this notion was justified when the IRA breached their ceasefire in 1996 with bomb attacks on Canary Wharf in February and Manchester in June."
Lord Empey said unionists did not appreciate the extent to which the IRA had become infiltrated by the security services.
He added: "With hindsight, the ceasefire's significance was that it represented the IRA's acceptance that their campaign had failed and they realised there was no point in continuing."