The Taoiseach and the British Prime Minister have issued a statement urging Northern Ireland's political parties to complete the transfer to justice and policing powers early in the New Year.
The British government stressed that a proposed £1bn package to fund devolution would only be handed over if the process was completed soon.
Sinn Féin wants a deal on the transfer of policing and justice powers by Christmas, with a devolution date for early next year, but Democratic Unionist Party (DUP) leader Peter Robinson is resisting an early deal.
In the joint statement, the governments warned that if devolution is not concluded within months, then Gordon Brown's offer of a financial package to fund the move and to cover the cost of legacy issues from the Troubles could be taken off the negotiating table.
Tensions between First Minister Peter Robinson and Deputy First Minister Martin McGuinness of Sinn Féin boiled over earlier this week when they clashed over the devolution issue in front of the cameras at a press conference.
In a bid to create momentum towards a deal, the British and Irish governments last night pledged to review progress in the New Year.
The statement from Mr Cowen and Mr Brown said: ‘The Prime Minister agreed a generous financial settlement in September that will ensure that a devolved Justice Department will have the resources it needs to manage particular financial pressures around, for example, (police) hearing loss claims without detriment to front line policing and justice services.
‘The financial package will only be available if devolution is completed in the coming months.’
They said the early completion of devolution was important to sustaining public confidence and enhancing Northern Ireland's international reputation.
They added: ‘Once final agreement is reached by the parties, approval by Westminster of the necessary transfer orders can be achieved within a matter of weeks following a request from the Assembly.
‘The British government stands ready to bring forward these orders in the New Year.
‘We have discussed the limited number of outstanding issues with the parties. We believe that there are no differences incapable of resolution and are optimistic the parties can find early agreement.
‘We will stay in close touch with the parties as they continue discussions over the coming days.’
The premiers said: ‘We believe that early completion of devolution is important. We have, therefore, asked the Secretary of State for Northern Ireland and the Minister for Foreign Affairs to meet at the beginning of January to review progress towards the necessary cross-community vote in the Assembly.
‘While these matters can best be resolved by the parties themselves, we remain available to help as required.’
