LOYALIST terrorists yesterday threatened to murder civilians in the Irish Republic if the Drumcree Orange Parade was banned.

In a statement addressed to the Irish government and using a recognised codeword, the ultra-hardline Loyalist Volunteer Force (LVF) said it would start killing immediately the march was banned.

The threat was condemned by both sides in the dispute and the Government. ''This is exactly the kind of situation we are trying to avoid,'' said Northern Ireland Secretary Mo Mowlam.

Catholic residents of Portadown's Garvaghy Road, meanwhile, said they expect a decision within the next 48 hours on whether the parade will go ahead on Sunday.

Dissident loyalists are widely thought to have been responsible for the murder of taxi driver Michael McGoldrick shortly after the stand-off last summer.

The LVF is also believed to have murdered Gaelic sports official Sean Brown in May. They also carried out a bomb attack on Sinn Fein's offices in Monaghan, in the Irish Republic.

Emerging from an hour-and-a-half of talks with Ms Mowlam, Garvaghy Road residents' spokesman Brendan McKenna said he was confident she would personally inform him of her decision before the weekend.

But he insisted he had no idea which way the ruling would go.

After her meeting with Garvaghy residents last night, the Secretary of State insisted she had not yet made a decision on the parade.

She is due to attend a meeting with Tony Blair and Irish premier Bertie Ahern today, which is expected to be dominated by the Drumcree crisis.

''I will remain hopeful to the end. I refuse to give up and I will keep talking to both sides,'' Ms Mowlam said.

Garvaghy residents were preparing to mount roadside pickets. But they have been told by police they may not be able to hold a street festival planned for the day of the parade.

An RUC spokesman said police could not close off the road to facilitate the parade, although he insisted it had not been banned and could be held on the roadside.

Mr McKenna said the police decision was ''ominous''.

He added: ''The Secretary of State said no decision had been made, but the RUC have already taken one decision in relation to this Sunday by preventing our festival.''

He said there had been no new proposals put to residents.

''As far as I can see, we are still talking about an Orange march with 1500 Orangemen coming down the Garvaghy Road.

''What I am saying is that the nationalist community has to have a breathing space,'' said Mr McKenna.

He was in no doubt about the seriousness of the LVF threat.

''The same people responsible for that statement killed a taxi driver last year,'' he said.

The LVF statement read: ''If the Orange parade does not go down the Garvaghy Road on Sunday the Irish government may expect civilians to be killed in the Irish Republic. This threat will be carried out immediately if the parade is banned.''

The breakaway group, based in Portadown, was outlawed by the Northern Ireland Secretary last month. Its threat came after Tuesday's hardline comments from the Irish government, urging Mo Mowlam not to force the parade down the Garvaghy Road, which Foreign Minister Ray Burke said would be ''folly''.

Ulster Unionist security spo-kesman Ken Maginnis said: ''Sadly much of the aggravation which has led to this unacceptable declaration (the LVF statement) lies at the feet of Bertie Ahern and Ray Burke, whose utterances have been more than unhelpful insofar as they imply a threat against the Unionist tradition,'' he said.