Stormont talks: Westminster to 'consider all options' after Easter
The UK government will "consider all options" after Easter, including direct rule, if talks to form a Northern Ireland Executive fail.
Northern Ireland Secretary James Brokenshire made the comment in the House of Commons on Tuesday.
However, Sinn Féin's Michelle O'Neill said the only option he was entitled to take was "to call an election".
"Direct rule is not an option," she said, adding that such a move would amount to "an act of bad faith".
Speaking at Westminster, Mr Brokenshire said in the absence of a devolved assembly, it was up to the government to provide "political stability".
However, he added that the government "did not want to see a return to direct rule".
On Monday, the secretary of state said there was a short window of opportunity for the talks.
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He removed the prospect of a second snap election within weeks and told reporters that there was no appetite for another contest.
Mr Brokenshire told Westminster that he would bring legislation to the House of Commons after the Easter recess - on 18 April - depending on the outcome of the talks.
If they are successful, he said he would push forward laws to allow an assembly to be formed.
However, if they fail, he said he would "at a minimum" bring forward legislation to "set a regional rate to enable local councils to carry out their functions and to provide further assurance around the budget of Northern Ireland".
In response, Sinn Féin's northern leader Michelle O'Neill said: "There is only one option which the British secretary of state is entitled to take and that is to call an election."
She added: "There is no legal basis for any other course of action. And while parties may, or may not, want an election the fact is if the British secretary of state brings in new legislation to restore direct rule that will be an act of bad faith and a clear breach of an agreement between the Irish and British governments in 2006."
The talks collapsed on Sunday ahead of Monday's 16:00 BST deadline.
Issues like the Irish language and the legacy of the Troubles are the main sticking points.
In a memo to all his staff, the head of the Northern Ireland Civil Service Sir Malcolm McKibbin has promised to try to maintain a "business as usual" approach during what he describes as "this time of uncertainty".
Sir Malcolm confirmed the civil servants would use the limited powers open to them to keep funds flowing in order to carry out the essential work of delivering public services.
But he added that these powers were no substitute for a regular budget agreed by executive ministers.
The two biggest parties, the DUP and Sinn Féin, blamed each other for the breakdown in talks.
The political deadlock came after a snap election on 2 March brought an end to Stormont's unionist majority and the DUP's lead over Sinn Féin was cut from 10 seats to one.
Under Northern Ireland's power-sharing agreement, the executive must be jointly run by unionists and nationalists, with the largest party putting forward a candidate for first minister.
The party said it would not share power with DUP leader Arlene Foster as first minister until the conclusion of a public inquiry into the Renewable Heat Incentive (RHI) scheme.
Mr McGuinness, who had been suffering from a rare heart condition, died last week at the age of 66.