By Ian Graham
DUBLIN (Reuters) - Northern Irish leaders prepared on Saturday for three weeks of challenging talks to save their devolved government after a snap election that could have dramatic implications for the politics and constitutional status of the British province.
The pro-British Democratic Unionist Party narrowly remained the largest party after the closest-ever election for the provincial assembly. But surging Irish nationalists Sinn Fein came within one seat of their rivals to deny unionist politicians a majority for the first time since Ireland was partitioned in 1921.
Major policy differences between the sides risk paralyzing government, dividing communities and creating an unwelcome distraction for Prime Minister Theresa May as she prepares to launch Britain's formal divorce proceedings from the European Union later this month.
Northern Ireland is the poorest region of the United Kingdom and potentially the one most economically exposed to Brexit, as its frontier with the Republic of Ireland is the UK's only land border with the EU.
"The election yesterday was in many, many ways a watershed election. Clearly the notion of a permanent or a perpetual unionist majority has been demolished," Sinn Fein President Gerry Adams told reporters in Belfast.
"We need to reflect on that and so do the leaders of unionism and so does everyone on this island," he added, standing in front of a mural of Bobby Sands, a member of the militant Irish Republican Army (IRA) who died in a hunger strike in prison in 1981.
The two largest parties have three weeks to form a new power-sharing government to avoid a return to direct rule from London for the first time since 2007. Sinn Fein said it would make contact with the other parties on Sunday.
With relations at their lowest point in a decade and Sinn Fein insisting among its conditions that DUP leader Arlene Foster step aside before it will re-enter government, few analysts think an agreement can be reached in that time.
An acrimonious campaign also added to the friction. Foster antagonized nationalists with her outright rejection of some of Sinn Fein's demands, saying: "If you feed a crocodile, it will keep coming back looking for more."
Michelle O'Neill, the 40-year-old new leader of Sinn Fein whose elevation represented a generational shift within the former political wing of the IRA, benefited most from the highest turnout in two decades.
"Foster angered nationalists and made sure they went out to vote but Michelle O'Neill is also a much more acceptable nationalist face than previously," said Gary Thompson, a 57-year-old voter, as he went for a jog near parliament buildings.
Pensioner Tom Smyth, a DUP supporter, said Foster had to stand up to Sinn Fein but in doing so probably helped mobilize her rivals' vote.
"This is terrible," he said. "There will be no living with them (Sinn Fein) now. All my life there has been a Unionist political majority. I feel a bit exposed now and wonder what the future holds."
Nationalist candidates, traditionally backed by Catholics, narrowed the gap overall with unionists, who tend to be favored by Protestants, to just one seat. Smaller, non-sectarian parties captured the remaining 12 percent of the vote.
Northern Ireland is still marginally a mainly Protestant province but demographics suggest Catholics could become the majority within a generation. The shift in the election will embolden Sinn Fein in its ultimate goal of leaving the United Kingdom and uniting the island of Ireland.
The party has increased calls for a referendum on the issue since Northern Ireland, like Scotland, voted to remain in the EU while the United Kingdom's two other countries, England and Wales, chose to leave in last year's Brexit vote.
Sinn Fein's Mairtin O'Muilleoir, the province's outgoing finance minister, described Brexit as "the gift that keeps on giving" for those that want a united Ireland.
"The massive shift towards nationalism in this election completely changes the landscape and most certainly brings the constitutional question to the foreground," said Peter Shirlow, Director of Irish Studies at the University of Liverpool.
Britain's Northern Ireland Minister James Brokenshire urged the parties to engage intensively in the short time available. Ireland's foreign minister said both governments stood ready to provide whatever support was needed.
Former Northern Ireland first minister David Trimble, a key player in the 1998 Good Friday peace agreement that ended three decades of sectarian bloodshed, said the British government should find a way to give the parties more time.
Senior unionist politician Jeffrey Donaldson told BBC Radio:
"If we can't do it in three weeks it could be a prolonged period of direct rule.
"In those circumstances, with Brexit coming down the road, we won't have our own administration to speak for us and offer the best prospect of delivering the kind of outcome we need."
(Writing by Padraic Halpin; Editing by Mark Trevelyan)